The U.S. dollar yesterday closed solidly higher against all major European currencies except the British pound, which held firm with Bank of England support.
In Tokyo, however, the dollar fell sharply against the Japanese yen in the heaviest trading in eight weeks. The dollar fell 2 yen to close at 289.40 yen to the dollar, the first time in more than three months that it had dropped below 290. Bankers said that trading companies apparently were unloading their dollar holdings in fear that the yen is undervalued in relation to the dollar.
In London, the pound held firm, closing at $1.7185, up from $1.7160 Tuesday. London dealers said the Bank of England intervened - as it has for the past several days - with substantial purchases of dollars in order to build up its depleted foreign reserves and to keep the pound from rising too fast.
Dealers said there has been strong upward pressure on sterling as a result of foreign demand for the high-yield British government bond issue due to be issued Thursday.
Dealers said short-term interest rates continued to influence foreign exchange trading on the Continent. In Zurich, the dollar closed at 2.5079 Swiss francs, up from Tuesday's 2.5048 and its highest rate in six months.
In Amsterdam, the dollar was at a three-month high, closing at 2.5225 guilders compared with Tuesday's 2.5170.