Dollar falls vs. mark over concern about German rates

March 24, 1993|By Bloomberg Business News

NEW YORK -- The dollar finished mixed against mos currencies yesterday but weakened against the mark amid concern about high German money-market rates.

The dollar fell to 1.63 marks,from 1.639 late Monday. The dollar strengthened to 116 yen as of 4:45 p.m. EST, from 115.77 Monday.

The dollar hit a new low of 115.08 yen in London amid expectations that Japan's government will spend huge sums to stimulate its slumping economy.

The dollar weakened against the mark after the German central bank, the Bundesbank, in preparing for its purchases and sales of German money-market securities, signaled that it is nervous about lowering German interest rates.

"The message the market got is that the Bundesbank isn't lowering rates any further this week," said Richard Vullo, senior market representative at the Bank of Montreal.

Higher German interest rates make mark-denominated deposits more attractive, boosting demand for the currency. Germany's central bank last cut interest rates last week, when it lowered the discount rate to 7.5 percent, from 8 percent.

Signs that German inflation is not abating also bolstered the mark. The cost of living in Germany's most populous state, North Rhine-Westphalia, rose 0.4 percent in the month through mid-March and 4.2 percent from a year earlier, up from an annual rise of 4 percent in mid-February.

Inflation is the sworn enemy of the Bundesbank, and analysts expect the bank to keep rate cuts in check until inflation declines.

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