Dollar plunges, recovers

October 06, 1992|By Bloomberg Business News

NEW YORK -- The dollar closed higher yesterday, recouping losses it posted during the day when U.S. stock prices dropped more than 100 points.

The dollar plunged toward its all-time low of 1.3860 German marks after worries about the stalled economy and the November election sent U.S. stocks plunging, traders said.

But the U.S. currency erased those losses after stocks recovered and investors concluded the slump in U.S. stock prices wouldn't last, traders said.

"People feel that the Federal Reserve will lower rates either tomorrow [today], when the Open Market Committee meets, or Wednesday and that will help the stock market and the dollar," said Lou Rappaport, chief dealer at Societe Generale.

Talk of intervention by the Federal Reserve yesterday also drove the dollar higher by spurring investors to buy back the dollars they sold earlier at higher levels, traders said.

The dollar finished at 1.4194 marks, up more than a pfennig from 1.4056.

After the 57,000 drop in non-farm jobs in September and other signs of weakness in the U.S. economy, many investors are sure the Fed will pare the discount rate or federal funds rate by as much as half a point from their current 3 percent.

By contrast, the tight monetary policy of other central banks, particularly the Bundesbank, is seen as a a constraint on their ability to help their markets, traders said.

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