French stock prices jumped by an average 5 percent in hectic trading on the Paris Bourse yesterday following the solid defeat in Sunday's run-off elections of the Communist-Socialist alliance by the conservative coalition that has ruled France for 20 years.
The U.S. dollar firmed and the French franc climbed from 4.67 to 4.59 to the dollar in what one trader called a "kneed-jerk" reaction to the election results. The conservatives won a 291 to 200 edge over the leftists in the National Assembly, France's lower house, in the final voting.
In contrast to the upbeat stock and currency news, gold builion prices plunged following the election. Traders said gold, a traditional hedge in uncertain times, also suffered from fears that the United States soon may sell some of its gold reserves to raise more funds to support the dollar abroad.
Gold fell $4.30 on the London market to close at $179.45 an ounce, against $183.75 Friday. In Zurich, gold ended at $180.12 an ounce compared with Friday's $183.125.
The U.S. dollar was helped primarily by central bank intervention by several nations. The Bank of Japan began the effort by buying an estimated $400 million after the dollar closed at the newest postwar low of 230.025 yen on Friday. While the intervention prevented a slip through the 230-yen level, the sollar ended the session in Tokyo unchanged.
In Frankfurt the dollar was little changed in moderate trading and closed 2.0420 marks, against 2.0450 Friday. It gained to 1.9195 Swiss francs compared with 1.8925 Friday, to 2.1832 guilders from 2.1820, but eased to 31.72 Belgian francs from 31.73.
Washington Post special correspondent John Robinson reported yesterday from Brussels that British Chancellor Denis Healey took a sharp sideswipe at recent U.S.-West German attempts to stabilize the dollar.
Addressing a meeting of finance ministers of the nine-nation European Economic Community, Healey claimed that the dollar support measures worked out earlier this month between Washington and Bonn "have had very little effect" on exchange rates. He warned against isolated measures such as these "dribbling out" in an uncoordinated fashion.
Healey said such moves should be part of a more general package, with growth, currency stability, capital flows, energy and trade as its five major components.
His statement came just three days before the scheduled Anglo-American summit in Washington, which is scheduled to discuss plans to shore up the U.S. currency and bring order to the international economic disarray that surrounds it.