MONETARY AUTHORITIES SAID TO LOSE CREDIBILITY

  The monetary authorities of the major
  industrialised countries lost their credibility this week as
  the dollar was sold off despite pleas from ministers and
  widespread central bank intervention, dealers said.
      The dollar's fall below 150 yen, which follows last month's
  Paris currency stabilisation agreement by the U.S., Japan, West
  Germany, Britain, France and Canada, is a dramatic reversal of
  the success of the Group of Five (G-5) 1985 New York Plaza
  meeting to weaken the dollar, they said.
      The G-5 and the market agreed in 1985 that the dollar was
  overvalued but this time the market and the authorities are on
  different sides, dealers said.
      Apparent confusion in the ranks of the G-5 nations has
  encouraged the market to challenge the authorities despite
  concerted intervention by the central banks of the United
  States, Japan, Britain and West Germany, they said.
      Pleas by Japanese Finance Minister Kiichi Miyazawa for
  action to stabilise the dollar were matched over the weekend by
  comments by U.S. Treasury Secretary James Baker that there was
  no target zone for the dollar. The dollar was sold anyway.
      Yesterday's comment by Baker that he stood by the Paris
  accord did nothing to reverse sentiment, dealers said.
      The intervention, backed by remarks by Fed Chairman Paul
  Volcker and Japanese central bank governor Satoshi Sumita,
  which a few months ago would have brought the dollar fall to a
  halt, has done little but slow the rate of its decline, they
  noted.
      The situation has again raised the question of whether
  intervention can succeed against the trend in today's huge
  currency markets. Dealers said the market's cool response to
  intervention reflected a basic oversupply of dollars.
      "This means that the current dollar selling is not of a
  sheer speculative nature but backed by real demand," said Koichi
  Miyazaki, deputy general manager at Sanwa Bank.
      Dealers said the dollar will remain weak despite the
  intervention and it is only a matter of time before some
  operators try to push it below 148 yen. The dollar closed in
  Tokyo today at 149.40 against New York's 149.30/40. Its record
  low was 148.40 in Tokyo last Tuesday.
      Dealers said the dollar will gain only temporary support to
  rise above 150 yen toward early April when the Group of Seven
  industrial nations meets to discuss currencies again.
      The market expects the seven nations (the Paris six plus
  Italy) to try to agree on another way to stabilise currencies
  apart from intervention, a chief dealer at a U.S. Bank said.
      Dealers said they were unsure what other methods could be
  used and they are sceptical anyway about how long the Paris
  accord nations, particulary the U.S., Will remain willing to
  prevent a further dollar fall given the continuing high U.S.
  Trade deficit, especially with Japan.
      Further pressure from a protectionist U.S. Congress for a
  lower dollar is also limiting Washington's options, they said.
      The market now thinks the central bank action is to slow
  the dollar fall, not to push it back over 150 yen, said
  Tadahiko Nashimoto, manager at Long Term Credit Bank of Japan.
      Another bearish factor for the dollar is expected large
  forward dollar sales from April to June for export bills
  falling due for Japanese exporters from April to September.
      The exporters had delayed in expectation of a further yen
  depreciation, dealers said.
      Yesterday's request to 30 trading houses by the Ministry of
  International Trade and Industry to restrict dollar sales looks
  ineffective in light of this real demand, they said.
      The market is also anticipating active institutional dollar
  sales to hedge currency risks on bond holdings from the new
  business year starting April 1, dealers said.
      "The market seems to have established a new dollar trading
  range between 147 and 149 yen," one dealer said.
      The dollar traded between 151 and 153 yen after the Paris
  accord on February 22 and 150 yen was then considered the low
  end for the dollar against the yen, he said.
      Some dealers now believe that if the dollar falls below 148
  yen, it will pick up renewed downward momentum and slide to
  145.
  

