The battered U.S. dollar continued to fall against the Japaneses yen yesterday despite heavy intervention by Tokyo, indicating the markets still are in turmoil following Monday's unexpected plunge through the 200-yen barrier.
Although the dollar staged a modest comeback against the major European currencies, it plunged to another record low in Japan, sliding another 3.5 yen to close at 195.525. On Monday, the dollar had slipped by 2.2 yen.
Experts said the improvement in the European markets was a sign that "people decided the dollar has fallen for enough." Some said traders were waiting for comparative U.S. and West German trade figures, to be published today.
However, there seemed to be no telling when the fall of the dollar in relation to the yen would begin tapering off. The Bank of Japan reportedly bought $100 million of some $819 million sold in spot transactions, but failed to stem the tide.
Meanwhile, U.S. officials confirmed yesterday the United States has no plans to take any new action to deal with the dollar's decline, either through a new presidential statement or Federal Reserve moves to raise interest rates further.
The administration's view was said to be that the dollar's new slide was an artificial one, touched off primarily by fears that oil-producing countries might abandon it as a standard, but that these fears were unwarranted.
Anthony M. Solomon, the U.S. undersecretary of the Treasury for monetary affairs, told a Senate hearing on Monday the U.S. did not expect the oil-producing countries to shift away from the dollar.
U.S. officials are said to believe the dollar problem is long-run dilemma whose solution involves long-term changes, such as reduced inflation and enactment of an energy bill. They say short-term remedies won't do the job.
The yen's appreciation was expected to heighten pressure on the Japanese to stimulate their economy to help increase imports. When the yen's value rises in relation to the dollar. Japanese goods become less attractive here.
Toshio Komoto, minister of international trade and industry, told reporters in Tokyo that the government must act now to spur domestic demand and bring in more imports. He said an "emergency" program was needed to stem the yen's rise.
Both Japan and West Germany promised the seven-nation economic summit meeting in Bonn last week they would stimulate their economies more rapidly. However, such moves require new legislation, and the outlook is not certain.
For Americans, the dollar's decline in the past two days has meant that a moderate 5,000-yen dinner has gone up from $24.84 to $25.57. In late May, a similar meal would have cost $21.83.
Closing rates for the dollar in Europe were Zurich, 1.77825 Swiss francs, up from 1.77195 Monday, Paris, 4.3985 francs, up from 4.3945; Amsterdam, 2.2190 guilders, up from 2.2055; and Milan, 844.1 lire, up from 842.5.
The dollar's modest improvement in Europe sent gold prices down in a notch in London, bullion prices closed at $194.60 an ounce, compared to $195 on Monday. In Zurich, gold fell to $193.875 an ounce, from $195.375 before.