The U.S. government yesterday stepped up its intervention in foreign exchange markets to stem a decline that had brought the dollar to record new lows. The result was a dramatic and unusual recovery.

After ahastily arranged huddle among Federal Reserve Chairman Arthur F. Burns,Treasury secretary W. Michael Blumenthal and others, the Treasury and the Fed in a joint midday announcement revealed a multibillion-dollar increase in the funds available for propping up the dollar.

President Carter, in Paris for talks with French President Valery Giscard d'Estaing, was informed of and approved the intervention announcement.

Although a cheaper dollar spurs exports, American officials have become concerned about the recent rapidity of the dollar's decline. A depreciating dollar boosts inflation at home (as the cost of imports rises) and tends to make the entire international monetary system unstable.

Treasury officials said last night that the dollar, which had the day before lost 2 per cent against the German mark, yesterday went up 3.3 per cent against the Germany currency. And, compared with a Tuesday drop of 4 per cent against the strong swiss franc, the dollar yesterday soared 6 per cent. A 2.5 per cent loss against the French franc Tuesday was fully recovered yesterday.

Sources stressed that the United States had in "no way" reversed its opposition to massive intervention, which would seek to "peg" or fix the rate of the dollar at a given level.

Instead, yesterday's steps were designed to carry out a commitment made by President Carter on Dec. 21 that the United States would, "in close consultation with our friends abroad, intervene to the extent necessary to counter disorderly conditions in the exchange markets." In the intervention process, the government buys dollars with foreign currencies, driving up the price of the dollar.

Yesterday's action was also intended to provide concrete evidence that Europe need not fear an American policy of "benign neglect" about the recent depreciation of the dollar.

The Fed-Treasury statement revealed two things. First, the existing $20 billion swap network operated by the Federal Reserve System, by which the Fed borrows or exchanges foreign [TEXT OMITTED FROM SOURCES]