Treasury Under Secretary Anthony M. Solomon yesterday hailed the revaluation of the West German mark by the European Monetary System as a "positive contribution to exchange market stability."
Solomon told a news conference the dollar-mark shift "already has had a calming effect on the markets." He predicted the dollar would "strengthen, if not now, later in the year" when the U.S. inflation rate begins to ebb.
The dollar inched higher on some European markets yesterday following the announcement by the finance ministers of the Common Market that the West German mark was being revalued 5 percent against the Danish crown and 2 percent against all other currencies in the EMS.
Despite the slight gains yesterday, the dollar remained weak. Last week, the dollar dropped to its lowest level since October, 1978.
Gold prices, in the meantime, continued to rise in volatile trading. In Zurich, gold prices closed at $378.50 and in London the closing price was $377.75. The closing price in New York was $376.25.
At his news conference yesterday, Solomon also confirmed earlier reports that "there had been an adjustment" in U.S.-West German "intervention activities" -- meaning the two nations have agreed on lower targets for the defense of the dollar.
But Solomon denied that the two nations had set specific zones within which to "peg" the value of the dollar. He said his earlier remarks "should not be interpreted as meaning we were pegging the rate."
The action by the Common Market ministers, according to their communique, was taken in response to "tensions on the foreign exchange markets over the last few days."
The revaluation marks an attempt by the West German government to halt the buying pressures on the mark. West Germany fears these pressures will boost domestic inflation.
The European currency change is also seen as a move to stabilize international markets. "These adjustments," according to the communique, "are designed to make a positive contribution towards a more orderly development of the exchange markets, at the same time as helping the stability of currencies not in the system."
After rising slightly in Europe yesterday the dollar weakened in New York. In Frankfurt it closed at 1.7690 marks, up from Friday's 1.7635 then fell to 1.7670 in New York. In Zurich, the dollar rose to 1.5777 Swiss francs from 1.5725 then fell to 1.5640 in New York.
In London, the pound fell to $2.1570 from $2.1625.
Special correspondent John Robinson in Brussels also contributed to this story.