The United States, in coordination with other central banks, intervened in foreign exchange markets on seven separate occasions from August through January, the Federal Reserve Board reported yesterday, by selling dollars and buying West German marks.
But the operations -- aimed at slowing the dollar's extraordinary rise -- involved the equivalent of only $373 million, and the report concedes that the dollar steadied "but did not appreciably fall back."
Meanwhile, the dollar drifted lower yesterday, as markets proved a bit edgy about only slightly improved unemployment figures and remained nervous about the meaning of remarks by Federal Reserve Chairman Paul A. Volcker before Congressional committees. He said several days ago that the dollar could decline sharply.
In another development, Secretary of Commerce Malcolm Baldrige told the House Budget Committee that the dollar is 25 percent too high "for the full range of American industries to be able to compete." Baldrige said "the best thing would be for the dollar to go down 10 percent to 15 percent a year for two years."
The Fed's analysis of exchange market activity for the period from August through January was written by Sam Y. Cross, executive vice president of the New York Federal Reserve Bank. It discloses for the first time that following the highly publicized meeting of the Group of Five financial ministers in Washington on Jan. 17, the United States intervened on two days late in the month, buying $94 million worth of West German deutsche marks.
Participants in that ministerial meeting -- the United States was represented by then-Treasury secretary Donald T. Regan -- have disagreed publicly over what action they decided to take. Europeans ministers have insisted that the United States agreed to a more active intervention policy. But this past week, Assistant Treasury Secretary David Mulford testifed that there had been a shift in nuance rather than a substantive change.
Cross' account, to be published in the April issue of the Federal Reserve Bulletin, says that after the G-5 meeting, "visible foreign exchange market operations were in fact undertaken by several countries. . . .
"At the end of the month, however, market participants were still uncertain of the extent to which the authorities were prepared to intervene, and of the circumstances in which the central banks would judge intervention to be appropriate or helpful."
The five U.S. interventions prior to January came in September and October "to counter disorderly markets," Cross said. These operations, intended to reinforce highly visible intervention activity by the West German central bank, helped keep the dollar's rise "in check" -- but only for a time.
The report observed that the dollar had continued to rise despite a fall in interest rates, and a reduction by half in interest rate differentials with other important currencies. But the dollar was buoyed by the favorable outlook on inflation "and a continued preference on the part of both residents and nonresidents to invest in dollar-denominated assets."
The perception that "the authorities would be reluctant to use monetary policy to resist the dollar's rise" also contributed to the dollar's spectacular advance, the report said.
European closing dollar rates with late New York prices and comparable Thursday rates in parentheses:
Frankfurt, 3.3975 marks, down from 3.4085 (3.398 vs. 3.42); Zurich, 2.89 Swiss francs, down from 2.9015 (2.893 vs. 2.91); Paris, 10.3725 francs, down from 10.3937 (10.373 vs. 10.406); Milan, 2,135 lire, up from 2,123.60 (2,118.64 unchanged).
In Tokyo, the dollar rose slightly to 261.65 yen from 261.35 but in New York it faded back to 260.96 from 261.57.
Gold rose in Europe but fell in New York.