The dollar continued its dramatic rise against major European currencies today, at one point breaking through the symbolic barrier of 10 French francs during a day in which records also were set against the British and Italian currencies.
The rising value of the U.S. currency, already a subject of recent meetings among economic experts, is expected to be a topic of political talks between U.S. and European leaders. A series of meetings is scheduled in the next months as pressure builds among European leaders for the Reagan administration to take action to lower its budget deficit and interest rates. Exchange rates also are likely to be on the agenda of the Bonn summit of leading western industrial nations and Japan in early May.
Last month, according to French officials, British Prime Minister Margaret Thatcher took the unusual step of appealing personally to President Reagan for the leading industrialized nations to take joint action to halt the dollar's rise.
In London, the pound closed at $1.096, below $1.10 for the first time. Here in Paris, the dollar slipped back below 10 francs, ending the day at 9.9755, and in Milan, it closed at 2,003.8 Italian lire. The dollar also set a 13-year high against the West German mark in Frankfurt, at 3.2645 marks, and a 10-year mark in Zurich against the Swiss franc, at 2.7887.
By comparison, the dollar was worth but 4 French francs as recently as 1980. It has gained 150 percent over the franc since. American travelers paid $2.40 for a British pound as recently as 1975, but today currency dealers speculate about a $1 pound within the next few months.
Economists believe that the main reason for the recent rise in the dollar has been the prospect of continuing high U.S. budget deficits and continued high U.S. growth rates relative to those in Europe. This promises high returns on European investments in the United States.
The U.S. currency's renewed surge against key European currencies came as good news for American tourists abroad and European exporters to the United States but bad news for central banks struggling to restore some order to the world economy. There is a widespread perception in Europe that the dollar is overvalued but little agreement on when it might begin to come down.
The concern felt in other industrialized countries at the dollar's uncontrolled rise was reflected in a speech less than two weeks ago by the newly appointed secretary general of the Paris-based Organization for Economic Cooperation and Development, Jean-Claude Paye, in which he criticized U.S. budgetary policy.
"The dollar exchange rate is considered almost unanimously to be clearly overvalued, which in turn dangerously increases protectionist pressures and gives rise to fears that the dollar could at any moment begin an excessive and hard-to-control decline," Paye told the parliamentary assembly of the Council of Europe in his first major speech.
A further factor explaining the dollar's rise, often mentioned by U.S. officials, is the rising demand for the U.S. currency by European businessmen seeking a politically secure and economically sound investment. The "safe haven" argument occasionally is cited as justification for the lack of U.S. intervention in foreign currency markets.
Criticism by French officials of the high dollar has ebbed and flowed in the past few months -- with officials here divided over whether it has helped or hindered the country's economic recovery. A high dollar means that French exports become more competitive but also means France must pay more for essential dollar-denominated imports such as oil.
Observers here recall that when the dollar was at 4 francs, French politicians complained that it was impossible to break into the U.S. market because French industrial goods were overpriced. The more fashionable complaint today is that fluctuations in the U.S. currency create a climate of economic uncertainty.
In a speech earlier this month, President Francois Mitterrand blamed the "dollar shock" and the "oil shock" for France's economic difficulties.
In Britain, the record rise in the value of the dollar during the past few weeks has embarrassed Thatcher's Conservative administration. The British government was forced to raise interest rates twice in two weeks, in defiance of its own free-market philosophy, to prevent the pound from sinking to the $1 level.
The drop in the pound reflected the gloomy outlook for the British economy, which is heavily dependent on its North Sea oil reserves, in addition to the strong dollar. The run on the pound began after a rash of headlines, inspired by a confidential briefing by the prime minister's press secretary, suggesting that the government would do nothing to defend the currency.
The latest rise of the dollar against all major European currencies comes despite modest intervention by central banks.