The Federal Reserve Board sold $4.064 billion worth of Japanese yen and West German marks to prop up the value of the dollar on foreign exchange markets in February through April, a Fed executive reported yesterday
Sam Y. Cross, manager of foreign operations, wrote in the Federal Reserve Bulletin for July that $3.96 billion of the dollar purchases were made by selling Japanese yen the Fed was holding. The other $99 million came from sales of West German marks.
The Fed also sold $30 million worth of dollars on the open market on March 11 to buy West German marks when the dollar-mark rate was seen as getting too high, Cross wrote.
Despite the Fed's efforts, the dollar fell in value by 8 percent against the yen and 2 percent against the mark in that three-month period, Cross said.
The Fed, like other major central banks worldwide, trades its and other currencies when it believes the value of its currency is too far out of line with other currencies. The transactions usually aren't enough to turn the tide of trading on a given day, but they do signal to private money dealers that the government is willing to put up cash to defend the value of its currency.
The United States made $3.008 billion of its dollar purchases "in a series of operations" between March 23 and April 6, Cross wrote. He did not specify the dates, but did say the purchases were coordinated with the Bank of Japan and several European central banks.
Three more times between April 7 and April 17 the Fed bought $532 million, once again against yen, Cross wrote. The February-April activity ended late in the month when the Fed spent $424.9 million against yen and $99 million against marks.
The April purchases also were coordinated with similar operations by the Bank of Japan and several European central banks, Cross wrote