US dollar mixed

Press, 10 February 1986, Page 34

US dollar mixed

PA New York The dollar closed mixed on Friday as a stubbornlystrong yen continued to act as a drag on the U.S. currency, dealers said. With few participants expecting the dollar to trade much above 190 yen, the dollar had a muted response to surprisingly robust January U.S. employment data showing that the economy began the new year on a strong note.

A district court panel ruling that a key portion of the Gramm-Rudman law is unconstitutional also had little effect. The dollar ended at 190.55/65 yen, off from Thursday’s close of 190.90/00 and Friday’s high of 191.15. The dollar has been mired below 200 yen since January 24, when the Bank of Japan’s governor, Satoshi Sumita, said a doilar/yen rate of 190 would be acceptable, dealers noted.

While participants are reluctant to push the

dollar below 190 yen because the Federal Reserve has expressed concerns over a dollar freefall, they are equally reluctant to bid the dollar much above that level. “There is also the fear that central banks would intervene against the dollar if it embarked on an upward course,” an analyst said. As. a result, many expect the dollar to remain in a narrow trading range against most currencies. The Reagan administration’s call on Wednesday for a further currency realignment to redress the huge U.S. trade imbalance continued to fuel bearish dollar sentiment, traders said. The dollar closed at 2.4045/55 marks, up slightly from 2.4000/10 last night but well below the day’s high of 2.4130.

A 565,000 jump in nonfarm payroll jobs in January — more than double most economists’ forecasts — and an unexpected 0.2 per cent drop in civilian

unemployment to 6.7 per cent failed to break the dollar out of its recent range of 2.38 to 2.42 marks.

“One number is not enough to change market sentiment,” a dealer commented.

While a court panel ruled unconstitutional the automatic deficit cuts mandated by the GrammRudman law, the court stayed its decision pend-; ing an appeal to the Supreme Court •■ln effect, the initial deficit reduction of SUSII.7 billion this year still stands,” a trader said. Senator Phil Gramm, of Texas, said he plans to; appeal the ruling to the. Supreme Court , :‘

The Gramm-Rudman-law mandates specific, budget deficit reductions until a balanced budget emerges in 1991. The court ruling bolstered in-; terest rates in U.S. credit markets which in turn gave underlying support, to the dollar, dealers said. >