ROANOKE TIMES 

                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: SATURDAY, April 30, 1994                   TAG: 9405020169
SECTION: BUSINESS                    PAGE: BUSINESS   EDITION: METRO 
SOURCE: 
DATELINE: WASHINGTON                                LENGTH: Medium

AMID MARKET CONCERNS, U.S. SHORES UP DOLLAR AGAINST YEN

The Clinton administration, concerned that a sagging U.S. dollar could further undermine the stock and bond markets, directed the Federal Reserve to buy large amounts of U.S. dollars Friday to raise the currency's value on foreign exchange markets.

The action, which lowered the value of the Japanese yen, provided breathing room to the new, beleaguered government of Prime Minister Tsutomo Hata. Japanese officials feared that a further sharp increase in the yen's value would cripple foreign sales of Japanese goods, prolonging the recession there.

While the value of the dollar has been dropping in relation to the yen for some time, it had recently begun to decline against European currencies as well. That raised fears among administration officials that foreign investors would pull more funds out of the U.S. stock and bond markets, where prices have fallen significantly in recent months.

Administration officials indicated the currency intervention was based on the volatility of foreign exchange markets and was not done to help Hata, whose minority government will be hard-pressed to survive in Japan's faction-dominated parliament, through his political crisis. ``This is not part of our Japan policy,'' said a senior official.

But on another front, the administration offered Hata relief by delaying plans to cite Japan for discrimination in its government procurement practices. The 60-day postponement did not signal a change in policy toward Japan, according to an administration official. ``This is a respite, not a shift,'' the official said.

The decision was reported in Friday's editions of the Wall Street Journal.

Prior to the intervention, which Treasury Secretary Lloyd Bentsen announced in a statement, the dollar threatened to drop below its previous low of 100.35 yen to the dollar and plunge through the psychologically important level of 100 yen. The intervention helped the dollar only modestly as it closed at 101.70 yen, just slightly higher than where it began the hectic day.

Bentsen said the intervention was ``to counter disorderly conditions. This is in line with our previously articulated policy which recognizes that excessive volatility is counterproductive to growth. We stand ready to continue to cooperate in foreign exchange markets.''

The extensive purchases of dollars were part of a coordinated intervention by the Fed, the Bank of Japan and the Bundesbank, the German central bank. 


 by CNB