Long Recovery For the Dollar Called Doubtful --- Currency Stages Big Rally On U.S. Trade Report, But Skepticism Remains
Concern about a steep fall of the dollar to new lows was relieved by the surprisingly big improvement in U.S. trade reported Friday. A sustained recovery of the dollar still remains doubtful, however, in the view of currency traders and economists.</br></br>The drop in the November trade deficit to $13.22 billion from the record $17.63 billion the previous month came as a shocker to the foreign exchange market. Economists' forecasts placed the deficit around $15 billion and market rumors had the gap running as high as $20 billion. Wednesday's wave of coordinated central bank purchases of the dollar and an announcement of a U.S.-Japanese pact aimed at aiding further intervention led some market participants to conclude that even Washington and Tokyo were expecting a bad number.</br></br>So when the figure was reported Friday, the dollar quickly soared 3.9% to 131 Japanese yen, where it stood in late New York dealings, up from 126.05 Thursday. The dollar climbed 3.7% to 1.6885 West German marks from 1.6290. The dollar's late Friday quotes represented its highs for the day.</br></br>The dollar opened in Tokyo early Monday at 131.50 yen, up from Thursday's close of 126.95 yen. The Tokyo market was closed Friday, a national holiday.</br></br>Despite the dollar's spectacular performance, traders and economists say the show will be a limited engagement. They expect the dollar's rally to level into a relatively narrow trading range with the chance of a collapse greater than that for another takeoff.