NEW YORK -- The dollar slid against the German mark and hit a record low against the Japanese yen yesterday as investors turned their attention back to the poor state of the U.S. economy and the chances of another cut in U.S. interest rates.
Within the past two weeks, the dollar's perceived stability and the belief that the Bundesbank might soon cut interest rates to take the heat off the French franc pushed the U.S. currency as high as 1.5315 marks.
But now that tensions within the European exchange rate mechanism are subsiding, investors are again focusing on the threadbare condition of the U.S. economy, said Earl Johnson, a vice president at Harris Bankcorp.
The dollar retreated to 1.4532 marks, down more than 2 1/2 pfennigs from 1.48 marks Friday.
Trading yesterday was subdued, as a result of the Jewish New Year and the onset of the end of the third quarter, traders said.
"With only a few more days before the end of the quarter, everyone's just trying to keep what they've made," said Graham Beale, chief dealer at Hongkong Bank.
In the next few days, however, anxiety about the September U.S. non-farm payroll report due this Friday will weigh down the dollar, traders said. A poor report would probably trigger another cut in U.S. interest rates, they said.
The U.S. economy lost 114,000 jobs in September after shedding 83,000 in August, according to forecasts by economists in a Bloomberg Business News survey.
The dollar's prospects against the Japanese yen don't look much better, traders and analysts said.
After setting an all-time low yesterday of 119.14 yen overseas, the dollar closed at 119.71 Japanese yen, down from 120.71 yen Friday.
Early today in Tokyo, the dollar started trading at 119.38 yen, the lowest opening in Tokyo since the modern foreign currency exchange system began in the late 1940.
The yen continues to benefit from its perceived security as well as strong demand from Japanese companies sending overseas profits home before the Japanese fiscal half-year ends tomorrow, said Harris Bankcorp's Mr. Johnson.
Barring central bank intervention, the dollar could fall to 117 or even 115 yen within the next two weeks, said Takahiko Yano, a senior vice president at Daiwa Securities (America).
"If we see a stock market collapse, we could see all the central banks supporting the dollar," he said. Alternately, the Bank of Japan would probably help the dollar if it reached 115 yen to prevent market disruptions, Mr. Yano said.
"There's a point at which Japan begins to worry again about the strong yen," agreed Dr. Edward Campbell, senior economist at Brown Brothers Harriman. Elsewhere, the British pound strengthened to $1.7303, from $1.7126. The dollar fetched 4.8875 French francs, compared with 5.0400 Friday, and 1.2682 Swiss francs, up from 1.2945 Friday. The Italian lira was quoted at 1,218 to the dollar, down from 1,247 Friday.
Meanwhile, the Canadian dollar was buffeted by fresh selling on persistent doubts about Canada's constitutional referendum Oct. 26.
The U.S. dollar strengthened to 1.2489 Canadian dollars, from 1.2409, despite at least two rounds of intervention by the Bank of Canada.