Dollar, pound under German siege U.S. currency sets another record low against the mark

August 26, 1992|By Bloomberg Business News

NEW YORK -- The dollar fell to a new low yesterday against the German mark amid signs that U.S. consumers have become less confident about their economic future and that French voters might reject the European monetary union.

The dollar finished at 1.3998 German marks, down from Monday's close of 1.4021 marks.

The dollar weakened after the Conference Board reported an unexpected drop in its index of consumer confidence, to 58 in August from 61 in July.

Shortly afterward, the dollar tumbled to a record low of 1.3955 marks after several opinion polls suggested that French voters are narrowly divided on the Maastricht treaty for European monetary union.

"The news about the polls really seemed to weigh on the market," said Kenneth Gettinger, first vice president and manager of foreign exchange at Union Bank of Switzerland. "There were just no buyers around."

The possibility that French voters might reject the treaty in a Sept. 20 referendum lifted the German mark at the expense of other currencies, traders said.

The mark is regarded as the most stable and attractive of the European currencies and as a refuge in uncertain times.

The dollar later staged a modest comeback, possibly helped by corporate buying or by Bundesbank Vice President Hans Tietmeyer's remark that the dollar selling was "overdone," traders said.

There were rumors that the Federal Reserve was trying to support the dollar's value by buying it, said Belal Khan, a trader at the Bank of Tokyo.

"But I think if they got in, the market would have taken it as a chance to sell even more dollars than they have," Mr. Khan said.

The dollar will likely fall further before it rebounds, said UBS' Mr. Gettinger. He predicted that the dollar will trade between 1.39 and 1.41 marks today.

"Unless we get a rate cut out of Germany, intervention [to support the dollar] won't work," said Paul Spirgel, a trader at Bank Napoalim BM.

Elsewhere, the dollar finished at 124.51 Japanese yen, virtually unchanged from 124.53 yesterday.

The British pound closed at $1.9907, down from $1.9931 Monday.

The pound's weakness against the mark might soon force the Bank of England to intervene to keep its currency within levels dictated by the European rate mechanism.

The Swiss franc closed at 1.2456 to the dollar, up from 1.2433. The French franc closed at 4.7850 to the dollar, unchanged.

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