The yen slumped to a 63-month low today on the Tokyo foreign exchange market as the American dollar gained strength on the basis of continued international political and financial uncertainties and the increasingly sluggish performance of the Japanese economy.
The yen closed at 272.45 to the dollar in brisk trading, its lowest point since June 21, 1977, and 3.45 yen off Friday's market close. The Bank of Japan attempted to brake the yen's slide by selling roughly $200 million into the market, but the intervention appeared to have little effect, Japanese banking sources said.
At its current level, the Japanese currency has lost nearly 25 percent in value against the dollar since the beginning of the year. With the currency's fall today through the widely regarded psychological barrier of 270 yen to the dollar, foreign exchange dealers predicted that the yen is likely to remain weak and could snap the 280-to-the-dollar barrier by year's end.
An unexpected rise in the money supply and higher interest rates boosted the dollar against all currencies yesterday. Besides soaring against the yen, it set a record against the lire, and a 14-month high against the mark, United Press International reported.
Gold, which was tenuously above $400 Friday, skidded through the psychological level. The immediate reason for the drop was firmer interest rates, but dealers said the virtual absence of retail interest makes it vulnerable to any selling pressure.
Gold closed in Zurich at $388.50 an ounce, down from $406.50 Friday, in London at $387.50, down from $406.50, and in New York at $387.25 on the cash market, down from $406. The New York Commodity Exchange settled the current contract at $386.40, down from $406.80.
Silver retreated to $7.965 an ounce from $8.365; it settled on the Comex at $7.97, down from $8.41.
New York bank dealers said the buying of dollars was sparked by the rise in the money supply Friday -- most had expected a sizable decline -- which dampened prospects that U.S. interest rates would drop and also dashed hopes for a cut in the Federal Reserve's discount rate.
In Europe the dollar surged in Frankfurt to 2.55 marks from 2.52 Friday and its highest since Aug. 10, 1981. It rose to 2.5530 in New York. The mark, which would have been expected to be buoyed by the new Conservative government, came under pressure from Germany's high September unemployment.
In London the pound dipped to $1.685 from $1.6965, and it was $1.686 in New York. Dealers, however, said the pound was strong against European currencies.
Elsewhere the dollar rose in Paris to 7.1988 French francs from 7.1345 (7.2025 in New York); in Zurich to 2.195 Swiss francs from 2.172 (2.1980); and in Milan to 1,422.55 lire from 1,420.55 (1,433), UPI said.
As the yen's decline has gathered speed, Japanese officials, private economists and foreign exchange dealers have hotly debated the factors involved. Until recently, the consensus in the market here was that the continuing crisis in Lebanon and the financial turmoil in Mexico had helped spark a speculative dollar-buying spree among Japanese and foreign traders.
Market observers argued that higher interest rates in the United States also had encouraged a flight of investments into dollar-based holdings.
Now, however, a growing number of Japanese analysts say that a sharp fall in Japan's exports since the beginning of the year and a deepening slump in the domestic economy here share substantially in the blame.
"If the U.S. economy picks up in the early part of 1983, it should help our exports recover," said Zenichi Ishikawa, a senior analyst at Daiwa Securities. "Right now, however, we see very few encouraging signs."
Japanese economists said that, in the past, the country was able to weather downturns in business activity at home by expanding export sales to key overseas markets in the United States and Western Europe. But the global economic slump and growing resistence to Japanese goods in the West have made that formula more difficult to employ.