NEW YORK -- The dollar plunged to a record low against the German mark yesterday as bearish investors shrugged off two more attempts by central banks to support the U.S. currency.
The Federal Reserve, the Bundesbank and at least 10 other European central banks returned to the market yesterday morning to purchase dollars for 1.4220 marks, traders said. Though the Fed typically doesn't comment on its operations, other central banks confirmed their own purchases.
But the concerted intervention failed to blunt the selling, and it might even have given investors the chance to book larger profits by selling the dollar at higher levels, traders said.
"Unless it comes in larger amounts, or in more dramatic fashion, the intervention seems to be for naught," said Paul Farrell, chief dealer at Chase Manhattan Bank.
The dollar finished at 1.4021 German marks, down 2.7 pfennigs from Friday's close of 1.4294 marks. Earlier in the session, the U.S. currency briefly scraped 1.4000 marks, its lowest level since the currency was introduced in 1948.
While the U.S. currency set a record low against the mark yesterday, traders are skeptical that the dollar has reached bottom yet. Indeed, the speed of the dollar's decline has overwhelmed the ability of the market to forecast its next move.
"At this stage you have to look at technical projections" to plot the dollar's course, said Mr. Farrell. "Over the next few weeks, we could work our way into the 1.30s," he said.
The dollar will be under pressure as long as the U.S. economy remains feeble and interest rates in Germany are so much more attractive than those in the United States, traders said. The U.S. discount rate is currently 3.25 percent, while the German Lombard rate stands at 9.75 percent.
The dollar could gain some ground if the economic data released today show signs of an improving U.S. economy, but many investors are poised to sell on any rally, said Mark Rocca, a trader at Credit Agricole.
For the moment, however, the dollar appears to be stalled.
"There may still be opportunities for the dollar to spike down, but I think the 1.40 level is giving the dollar some support," said Peter Wong, a trader at Overseas Union Bank. In the next few days, the dollar could rebound to 1.4150 or 1.42 marks before investors begin selling again, he said.
In other trading yesterday, the dollar finished at 124.53 Japanese yen, down from 125.73 yen from Friday.
The British pound closed at $1.9931, up sharply from Friday's close of $1.9601. The pound briefly traded as high as $2.002, for the first time since February 1991.
The dollar bought 4.7930 French francs by the close, down from 4.9002 Friday, and 1.1887 Canadian dollars, down from C $1.1930.