Dollar Slides Below 140-Yen Level in Tokyo

The dollar fell below 140 yen to a new postwar low in early trading this morning in Tokyo, pressured by mounting skepticism over the health of the U.S. economy.

The U.S. currency opened at the critical 140-yen level and then slipped to 139.50 in Tokyo. The steep slide followed a steady weakening of the dollar Thursday in New York, where it closed at 140.75.

The previous record low against the yen, realigned against the dollar in the late 1940s, was 140.35, reached April 13 in London.

The Bank of Japan stepped in to intervene in the market shortly after the opening, dealers said, but the dollar continued its slide to just under the 140-yen level.

The intervention by the central banks is part of an agreement made in February and since reaffirmed by the seven major industrial nations to try and stabilize their currencies near present levels.

The dollar also dropped against the West German mark in early morning trading in Tokyo, falling to 1.7995 marks compared to New York’s close yesterday to 1.806.

U.S. officials have said that unless Japan and West Germany take steps to stimulate their economies and their demand for U.S.-made goods, the only way to cut the massive U.S. trade deficit and avert protectionist legislation is to allow the dollar to keep sliding.

The Inventory Factor

Traders in Tokyo said the dollar was pressured lower by continuing bearish sentiment, despite figures released Thursday showing that the U.S. gross national product grew at a strong 4.3% annual rate in the first three months of the year--higher than the 2.9% that had been expected.

Analysts, however, were quick to note that almost all the gain came from an increase in inventories, not necessarily a bullish sign for the future pace of the economy.

“You can’t take a number like this at face value,” one trader in New York said. “Most of the increase was in inventory accumulation. Final sales and investment were off. Net trade was only a minor positive.”

On Thursday, while the dollar skidded against most major foreign currencies, gold and silver prices rose sharply. Republic National Bank in New York quoted a bid for gold at $459.50 an ounce, up from $448.75 late Wednesday.

Gains for Gold

In London, gold was quoted at a late bid of $454, up $9.50 from late Wednesday. Gold closed in Zurich at $453.50, up $9.

On New York’s Commodity Exchange, gold closed at $460.40, up from $449.40 Wednesday.

Silver prices jumped to their highest level in three years. In late trading in London, silver was trading at $8.33 an ounce, compared to $7.85 Wednesday. It was the highest price for silver in London since June 29, 1984, when it closed at a bid of $8.38 an ounce.

On the Comex, silver closed at $8.900 an ounce, up from $8.030 Wednesday.

As part of its GNP report, the government said inflation was up during the first three months of the year, with a price index tied to the GNP climbing at an annual rate of 3.6%, the sharpest quarterly increase in three years. The inflation jump was blamed on higher energy prices.

Commodity prices, which tend to rise along with inflation, rallied after the inflation report, and foreign exchange traders were concerned “that inflation fears at this point may be warranted,” said McGroarty. “This spilled over against the dollar,” bringing it even lower.

The dollar had fallen Thursday in Tokyo to 141.15 yen from Wednesday’s 142.70 yen. Later in London, the dollar traded at 141.20 yen.

In New York, the dollar fell further to 140.725 yen from 142.25 Wednesday.

Other late dollar rates in New York on Thursday, compared to late Wednesday, included: 1.8060 West German marks, down from 1.8250; 1.4715 Swiss francs, down from 1.4955; 6.0075 French francs, down from 6.0725; 1,288.00 Italian lire, down from 1,300.50, and 1.33445 Canadian dollars, down from 1.33305.