The U.S. dollar slid to new all-time lows today in foreign exchange trading against the currencies of Japan, West Germany and Switzerland.
A London dealer said the decline of the dollar "looked frightening" at one stage as the price dropped and "people were still selling dollars" in hectic trading. He predicted a "state of turmoil" would develop in the market through the rest of the year.
By contrast, the price of gold jumped as much as $4 an ounce today.
Western European state banks were reported buying heavily into dollars to prevent the U.S. currency from sagging further. In Frankfurt, the West Germany Bundesbank reportedly bought a record $146 million.
The dollar lost 90 points on the day against the Japanese yen in trading in Europe and New York to close to 239.75 yen, the first time the dollar closing rate has dipped below 240.
The Tokyo markets were closed today for a holiday. The Bank of Japan is expected to intervene heavily in Tokyo's foreign exchange market Thursday and Friday to try to keep the U.S. dollar from falling below 240 yen, the newspaper Yomiuri said today.
Yomiuri said the bank would be prompted to intervene in the market with all available funds because of predictions that Japanese exports would suffer severely if the dollar stays below 240 yen.
Automobiles and cameras were mentioned as possible exceptions that might remain competitive.
Bank sources told the newspaper that stabilization of the yen's exchange rate depends on whether the government takes concrete steps this month to reduce Japan's huge trade surpluses themselves have pushed up demand for the yen and the lack of any signs of a quick reversal to the surplus trend has spurred speculators to buy yen with dollars.
Restrictions instituted this week by the Bank of Japan aimed at checking the influx of speculative dollars have proved ineffective so far.
There were rumors overseas that the Tokyo foreign exchange market might be closed Thursday, but Bank of Japan officials said the market would open as usual.
The stagnant U.S. economic performance remained the reason for the low confidence in the dollar.
In late trading, the dollar was quoted at 2.2318 West German marks, a new low, down from the previous low of 2.269Tuesday. At one point the dollar fell to 2.2380 marks before recovering.
The rate against the Swiss franc was 2.190 in Zurich, also a new low, down from 2.1950 Tuesday.
The dollar was marginally weaker against the British pound, which closed at $1.8176, up from $1.8175.
In Paris, the dollar dropped to 4.8475 French francs from 4.85 Tuesday. In Amsterdam, the rate was 2.4072 guilders, down from 2.4127, and in Milan, it was 877 Italian Iire, down from 877.35.
There was renewed confidence in gold, which gained $4 an ounce in Zurich and $2.75 in London, the major European trading centers.
Gold closed at $159.625 an ounce in Zurich, up from Tuesday's $155.625. The closing price in London was $159.50, up from $156.75.