Dollar Falls to Record Lows: Dollar Dips To Record Low Levels
Following news of an unexpectedly large U.S. trade deficit for October, the dollar was pounded on foreign exchange markets yesterday, plunging to record lows despite coordinated central bank interventionÛÓincluding purchases of dollars by the Federal Reserve-intended to slow the decline.</br></br>Exchange market trading was hectic, with the dollar sinking below the psychological barrier of 130 yen to 129.07 yen, and to 1.6329 West German marks in New York. The drop of the dollar in yen termsÛÓ2.36 percent in a single dayÛÓbrought it to the lowest point since modern exchange rates were established in the late 1940s.</br></br>Exchange market participants yesterday said they still believe that the policy being followed by Treasury Secretary James A. Baker III is to let the dollar weakenÛÓthus pushing up the price of imports into the United StatesÛÓin hopes that the competitive advantage for U.S. goods eventually will cause the trade deficit to shrink.</br></br>"With the yen at 129, the next stop would appear to be 120 to the dollar,Û said New York investment banker Geoffrey Bell, who criticized BakerÛªs strategy as too risky. ÛÏIf the dollar continues to go down, American interest rates will go up, or the stock market is going to crash again. Something will have to be done to reduce the high level of Ameri-See DOLLAR, D12, Col. 1 can consumption. I canÛªt believe that foreigners are going to continue to finance the U.S. deficits, unless Washington does something to stop the dollar slide.Û</br></br>Officials acknowledged that there had been strong central bank intervention, led by the Fed in New York, the Bundesbank in Frankfurt and the Bank of England in London, when the dollar dropped below 1.64 West German marks from 1.66 marks the day before.