The dollar was pounded to new record lows against the currencies of Japan, West Germany and a number of other countries despite massive central bank intervention yesterday, as foreigners expressed their disappointment in President Carter's anti-inflation plan.
Gold meanwhile jumped to a record $230.125 at the London afternoon fixing, up nearly $4 for the day. Later, it traded as high as $234.
The dollar dropped below 180 Japanese yen for the first time, and plunged to 1.77 West German mark as Bonn announced a $2.6 billion trade surplus for September, its largest since October 1977. The surplus was an indication that the dramatic appreciation of the mark has done little to curb that country's positive trade position.
Central banks intervened aggressively in Tokyo, Europe and New York currency markets but could only stop the dollar from dropping further despite total dollar purchases estimated to exceed $2 billion.
Treasury Secretary W. Michael Blumenthal at a press conference, indicated the U.S. would continue to intervene to prevent disorderly foreign exchange markets. And he expressed confidence that the "fundamentals" are moving in the direction of a stronger dollar.
But even Blumenthal's statements at best kept the dollar skid from getting worse.
Rene Monory, the French minister of the economy, was one of the few European officials who spoke for the record on the Carter measures. Like the British, be observed, "There are common points in our programs Washington Post staff writer Bernard D. Nossiter reported that Monory, speaking to America and British reporters, said that the U.S. President "had taken relatively severe measures." These are words of praise in the European world. He added that he could not explain today's fall in the dollar but made clear that Paris regrets it.
The European financial view of the Carter program was summed up by De Monde, the French Daily that usually reflects the finance ministry's view. Its editorial was headed, "A Long Sickness."
The paper cited American authorities to conclude that "the return to health" of the U.S. economy "could be very long in coming."
The Evening Standard, the most prestigious afternoon paper in London, used bold frontpage headlines to tell readers Washington was following London's lead.
The pay policy program here has cut inflation from more than 30 percent to less than 10 percent. But that did not impress British banks. The pound rose two cents yesterday to 2.03 dollars.
Foreign exchange market participants said it would take more than one day of active intervention to convince the markets.
"The markets have a tendency to feel that this kind of intervention is temporary and passive, and that the authorities back off quickly," said Robert LeClerc, vice president with Continental bank International. "If Mr. Blumenthal means what he says and backs it up, then the markets can turn around. But the psychology of the market is at present very anti-dollar, there's no question about that."
One foreign exchange trader for a leading bank said the markets were disappointed at the way President Carter presented his program, and that foreigners continued to believe that little is actually being done to bring this country's inflation rate or money supply growth under control for the near or intermediate-terM.
"There were too many admissions of failure and admissions of the depth of the problem" in the President's speech, this trader said. While the President was given credit for being honest and candid, "The reaction was that the administration people are still amateurs and don't know the full extent of the problem they are dealing with."
The dollar began its slide in Tokyo where markets opened soon after the President began speaking. The dollar dropped to 180.225 yen from 182.225 yen the day before, despite an estimated $800 million in dollar purchases by the Japanese central bank. in late trading the dollar kept sliding against the yen, closing in New York at 178.70 yen to the dollar.
Besides its drop against the yen and West German Mark, the dollar also hit record lows yesterday against the currencies of the Netherlands, Denmark, Norway, and Belgium.