Bears home in on franc and dollar


Kenneth Clarke, the Chancellor, enjoyed a temporary reprieve yesterday as foreign exchange dealers turned their attention to the dollar and the franc. The expected sell-off of the pound, following the surprise decision to peg interest rates last week, failed to materialise as bears homed in on the US and French currencies.

The dollar fell in the wake of the weekend collapse of the US-Japan car trade talks. The French franc also lost early gains following Jacques Chirac's victory in the presidential elections on Sunday.

London markets were closed for the VE Day celebrations but the pound, which was quoted in New York at $1.6048 and DM2.1915, is still expected to face further difficulties this week if Thursday's Bank of England inflation report suggests that government targets are likely to be breached.

The dollar opened lower in New York, reflecting the heightened trade tensions with Japan.The US currency was further undermined by comments from senior Bundesbank officials. Its president, Hans Tietmeyer, was quoted as saying that the only way to reverse the decline would be if Washington acted to boost savings and cut the deficit. Johann Wilhelm Gaddum, deputy president, said that intervention on the foreign exchange markets would be ineffective in stemming the dollar's slide.

The dollar opened in the US at 83.35 yen, down from Friday's US close of 83.94 yen, before falling further to 83.04 yen. It slid to DM1.3640 from DM1.3735. In Europe, the dollar was quoted at DM1.3640 compared with Friday's DM1.3690 and 82.90 yen against 84 yen on Friday.

The fall was less than some were expecting, given the bad news on trade and Friday's announcement of a 9,000 drop in US non-farm payrolls in April. The jobs figure has been taken, along with other recent evidence, to signal a slowing in the US economy, reducing the chances of an early raising of interest rates by the Federal Reserve.

One dealer said: "Dollar-yen has done as well as could be expected under the circumstances." He, and other dealers, noted that the closure of the London market made it difficult to gauge sentiment. "Overall the fundamental picture for the dollar hasn't changed," he said.

In thin trading in Paris, where markets were also closed for the VE Day, the franc firmed to 3.5465 against the mark, up from 3.5720 on Friday. Early euphoria following the election of JacquesChirac saw the French currency hit a 10-day high of 3.5350, but the enthusiasm turned to caution yesterday as markets questioned his commitment to the decade-old "strong- franc" policy in the face of massive unemployment.

The franc remained uncomfortably close to its all-time low of 3.5880, as dealers waited to hear details of the new administration's policies. Investors fear that, under Mr Chirac, the franc-mark link and commitment to European monetary union could be in jeopardy. If, as is widely expected, Mr Chirac appoints the pro-European Foreign Minister, Alain Juppe, as Prime Minister, the markets' worries will be soothed.

Mr Juppe said last week the franc was at its "right level" and that it was up to the Bank of France to defend it in order that a single European currency could be created as soon as possible.

Mr Tietmeyer, speaking after a meeting of the Basle-based G10 group of central bankers, said he saw no simple solution for stabilising exchange rates. But credibility was an important element of monetary policy and he welcomed Mr Chirac's commitment to price stability and to a stable franc.

ebookA unique anthology of reporting and analysis of a crucial period of history
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Accounts Payable

£12 - £15 per hour: Cameron Kennedy Recruitment: Excellent opportunity to join...

Technical BA - Banking - Bristol - £400pd

£400 per hour: Orgtel: Technical Business Analyst - Banking - Bristol - £400pd...

Account Management Strategy Manager

£38000 - £42000 per annum + competitive: Real Staffing: Required skills:Previo...

Business Analyst Consultant (Financial Services)

£60000 - £75000 per annum: Harrington Starr: Business Analyst Consultant (Fina...

Day In a Page

A History of the First World War in 100 Moments: Peace without magnanimity - the summit in a railway siding that ended the fighting

A History of the First World War in 100 Moments

Peace without magnanimity - the summit in a railway siding that ended the fighting
Scottish independence: How the Commonwealth Games could swing the vote

Scottish independence: How the Commonwealth Games could swing the vote

In the final part of our series, Chris Green arrives in Glasgow - a host city struggling to keep the politics out of its celebration of sport
Out in the cold: A writer spends a night on the streets and hears the stories of the homeless

A writer spends a night on the streets

Rough sleepers - the homeless, the destitute and the drunk - exist in every city. Will Nicoll meets those whose luck has run out
Striking new stations, high-speed links and (whisper it) better services - the UK's railways are entering a new golden age

UK's railways are entering a new golden age

New stations are opening across the country and our railways appear to be entering an era not seen in Britain since the early 1950s
Conchita Wurst becomes a 'bride' on the Paris catwalk - and proves there is life after Eurovision

Conchita becomes a 'bride' on Paris catwalk

Alexander Fury salutes the Eurovision Song Contest winner's latest triumph
Pétanque World Championship in Marseilles hit by

Pétanque 'world cup' hit by death threats

This year's most acrimonious sporting event took place in France, not Brazil. How did pétanque get so passionate?
Whelks are healthy, versatile and sustainable - so why did we stop eating them in the UK?

Why did we stop eating whelks?

Whelks were the Victorian equivalent of the donor kebab and our stocks are abundant. So why do we now export them all to the Far East?
10 best women's sunglasses

In the shade: 10 best women's sunglasses

From luxury bespoke eyewear to fun festival sunnies, we round up the shades to be seen in this summer
Germany vs Argentina World Cup 2014: Lionel Messi? Javier Mascherano is key for Argentina...

World Cup final: Messi? Mascherano is key for Argentina...

No 10 is always centre of attention but Barça team-mate is just as crucial to finalists’ hopes
Siobhan-Marie O’Connor: Swimmer knows she needs Glasgow joy on road to Rio

Siobhan-Marie O’Connor: Swimmer needs Glasgow joy on road to Rio

18-year-old says this month’s Commonwealth Games are a key staging post in her career before time slips away
The true Gaza back-story that the Israelis aren’t telling this week

The true Gaza back-story that the Israelis aren’t telling this week

A future Palestine state will have no borders and be an enclave within Israel, surrounded on all sides by Israeli-held territory, says Robert Fisk
A History of the First World War in 100 Moments: The German people demand an end to the fighting

A History of the First World War in 100 Moments

The German people demand an end to the fighting
New play by Oscar Wilde's grandson reveals what the Irish wit said at his trials

New play reveals what Oscar Wilde said at trials

For a century, what Wilde actually said at his trials was a mystery. But the recent discovery of shorthand notes changed that. Now his grandson Merlin Holland has turned them into a play
Can scientists save the world's sea life from

Can scientists save our sea life?

By the end of the century, the only living things left in our oceans could be plankton and jellyfish. Alex Renton meets the scientists who are trying to turn the tide
Richard III, Trafalgar Studios, review: Martin Freeman gives highly intelligent performance

Richard III review

Martin Freeman’s psychotic monarch is big on mockery but wanting in malice