For the first time since the attempted assassination of President Reagan last year, the United States yesterday intervened to stabilize currency relationships in foreign exchange markets. The action was triggered by the week-end devaluation within the European Monetary System of the French franc and Italian lira, which then plunged in comparison with the dollar when trading opened yesterday morning.
The Federal Reserve Bank of New York, acting for the Treasury, presumably sold dollars to bolster the franc, which at the opening of trading fell to 6.65 to the dollar in Paris, a slide of more than 6 percent from Friday's close. At the close yesterday, the franc was at an all-time low of 6.71 to the dollar.
Treasury Undersecretary Beryl Sprinkel said in an interview that "we intervened because we had a disorderly market. There was a major movement of all currencies vis-a-vis the dollar, and it was bordering on disorderly if not actually disorderly. There's no precise definition of 'disorderly,' and we had to make a judgment. . . ."
But some private experts viewed the American intervention as symbolic of a new understanding reached at last week's economic summit in Versailles, to co-operate more closely with Europe on "economic and monetary objectives." Sprinkel briskly rejected this thesis, saying "our policy was unchanged at Versailles."
Foreign exchange markets had been braced for a major decline in both the franc and the lira, following an emergency meeting of the EMS finance ministers to rearrange the relative value of their currencies, in view of the high French inflation rate and troublesome trade deficit.
French President Francois Mitterrand, alone among European leaders, had given first priority to the fight against unemployment, while the other countries more willingly accepted high jobless totals as a necessary evil while fighting inflation.
Over the week-end, the franc was devalued by 5.75 percent, and the lira by 2.75 percent, while the German mark and Dutch guilder were revalued by 4.25 percent, against the other EMS currencies. Within the EMS, that devalued the franc by 10 per cent and the lira by 7 percent against the mark and guilder.
The United States has been poised to intervene on two or three other occasions, including the day of the assassination of Egyptian President Sadat. The Reagan administration's strong distaste for interference with the private markets held back intervention at those times.
But at Versailles, the United States was pressured heavily by its partners, especially France, to adopt a more flexible intervention policy. And while the formal declaration at the summit's end revealed no change in the established U.S. commitment to intervene only when market conditions become "disorderly," the United States also agreed to work in closer harmony with the others on monetary affairs.
Although yesterday's quick intervention move was taken by some as evidence of a more relaxed American attitude, Treasury Secretary Donald Regan also said it was within the context of existing policy. In announcing the intervention, Regan said that "in our opinion, today's market is a disorderly market."
Some private analysts suggested that the market was not in fact disorderly, because the drop of the franc against the dollar was about what was predictable, given the new EMS alignment. One expert suggested that intervention had been undertaken "to prevent the emergence of an erratic market, which would itself be a change in policy."
Regan said that "fundamental economic factors in both the French and Italian economies necessitated the devaluation, and in that sense it was inevitable." He added the administration remains ready to intervene in a truly "disorderly" market but would not do so to prop up a currency or force one down.
Authoritative but unofficial sources said yesterday that France had spent about $15 billion in the past year trying to defend the rate of the franc, and was now down to perhaps less than $3 billion in monetary reserves, or less than the equivalent of one month's import costs--a level considered dangerously thin.