NEW YORK -- Tough talk on interest rates from Germany's chief central banker and pessimism about the U.S. economy helped drive the dollar to a 11-week low against the German mark.
Both the dollar and the mark gained against the yen, meantime, amid lingering speculation that Japan will cut interest rates to jump start its slumping economy.
The dollar fell to 1.6430 marks at the close in New York, down from 1.66 marks late Wednesday and its lowest level since June 16. The dollar rose to 105.85 yen, up from 105.35 yen Wednesday.
With a rate cut seemingly in the offing in Japan and the U.S. economy looking weak, the higher returns on German deposits are more alluring, traders said.
"You can't start buying dollars for marks because the interest rate differential will kill you," said Peter Iversen, vice president at Shawmut Bank of Boston. Germany's discount rate is 6.75 percent, compared with 3 percent in the U.S. and 2.5 percent in Japan.