The foreign exchange markets yesterday responded unenthusiastically to announcements here and in Bonn of a new U.S.-West German plan to stabilize the embattled dollar.
A disappointed American official shrugged it off: "How can you predict the markets?" he asked.
The dollar, which had been rising against the German mark since President Carter told a press conference last Thursday that a new effort to bolster the dollar was under way, lost a good part of its gains after details of the plan were officially disclosed here and in Bonn early yesterday.
In Frankfurt, the dollar closed at 2.04 marks compared to a pre-announcement peak of about 2.0880 marks.
But many dealers cautioned that trading was relatively thin, and that the markets may need more time to assess the situation. American officials, who believe that the dollar has dropped too far against the mark, predict that, in time, nervousness will subside.
"I think that if people feel and perceive our policy correctly, even though we are not 'pegging' the rate, (they will see) we are concerned about the dollar, we are prepared to act responsibly, and have the ability to act responsibly," a U.S. Treasury official said.
The agreement, announced here by Treasury Secretary W. Michael Blumenthal and in Bonn by Finance Minister Hans Matthoefer, adds $2.74 billion worth of deutschemarks to the supply available for intervention operations by the Federal Reserve.
Yesterday's agreement doubles to $4 billion the "swaps" agreement between the German Bundesbank and the Federal Reserve system, by which the U.S. borrows deutshemarks to "intervene" in foreign exchange markets when the dollar goes down sharply.
The Treasury also arranged to sell to the German central bank $600 million of its stock of special drawing rights. SDRs are a special unit of account distributed by the International Monetary Fund and now are worth $1.22 each. That will add about $740 million worth of deutschemarks for intervention purposes.
And finally, the U.S. said that it would draw on its reserve position in the IMF (in amounts which are automatically available up to $5 billion) if still further quantities of foreign exchange are needed for intervention.
The joint statement reiterated that intervention would take place in a "forceful" manner, but only to counter disorderly market conditions and not to sustain the dollar at any specific rate.
American officials flatly ruled out any number of actions widely rumored in the markets last week, including exchange controls, a bond denominated in foreign currencies, and an "equalization tax" designed to make American investment in foreign securities more costly.
Officials also said there would be no sales from the Treasury's gold stocks to central banks - as one way of acquiring foreign currencies - "because we're not going to give gold a monetary role." But officials did not rule out sales of Treasury gold at auction, either here, or abroad. Such a step "is always a possibility", one high U.S. official said.
At a news conference in Bonn, Matthoefer said that he and Blumenthal agree that the forces of a free market are too big to be controlled by actions of the kind taken yesterday, and that only market forces could determine the value of the dollar.
Matthoefer said that neither country was trying to interfere with such forces, but rather each is trying to smooth out erratic movements and to renew a sense of confidence in the dollar.
He added he thought the new measures "will have a stabilizing ...and confidence-building effect." Privately, some German officials criticized Carter's press conference remark, which they said began a speculative rise in the dollar before the package - worked out in secrecy over the past ten days - actually was announced.
Both here and in Bonn, the agreement was touted assignificant not only for adding to the credibility of U.S. dollar-propping activities, but for a "convergence" of views between two allies, who have been fueding over economic questions for many months.
But still, there were some nuances in the interpretation of the Bluementhal-Matthoefer document. Thus, a Treasury official emphasized as highly "useful" the German statement that they would re-evaluate their economic progress this spring.
He saw this as part of a new understanding by which the Germans would pay a bit more attention to the American emphasis on high economic growth rates, while the Americans, for their part, pay a bit more attention to the German concern for "stability of the foreign exchange markets."
But the word from Bonn yesterday was that German officials saw that part of the statement as nothing new, but at best a timely reaffirmation that the door is open to greater domestic spending if first-quarter results are disappointing.
American officials nevertheless think that they've gone further than befor in puncturing the "benign neglect" charge, and think that it was important to get the German commitment to the notion that "growth rates in some countries are still lower than desirable."
The joint statement said tht economic developments in the first economic developments in the first quarter of 1978 will be a key "in determing the future course of economic policies in the Federal Republic of Germany and elsewhere. "However, data to permit such an evaluation will not be available before mid-spring."
A Treasury official said this means that the Germans will take a new look at their economic policies - designed to achieve a real growth rate of 3.5 per cent this year - around early May. "I think this is a very useful statement for them to make, and I don't think it should be interpreted as either less than or more than that," he said.
In response to persistent European urgings that the U.S. do something to cut energy consumption, Blumenthal said that the Carter administration is studying whether energy legislation befor Congress will have to be supplemented by further action on Capitol Hill, or by administrative steps to curb energy use.
Treasury officials reportedly have urged consideration of quotas or a special import duty that would reduce oil imports, and thus contribute to a lessening of the trade deficit that has been a source of weakness for the dollar.
Coincident with the joint announcement with Bonn, the Treasury announced that the New York Federal Reserve Bank had been intervening in yen in the New York market on behalf on the Bank of Japan. There has been a substantial increase in the volume of trading in yen in the New York market whenthe Tokyo market is closed.