The dollar fell sharply against the yen yesterday morning in Tokyo, but it recovered later as the currency markets fell quiet ahead of a meeting of EU finance ministers in Valencia this weekend.
The US currency fell as low as 97.50 from the Thursday night New York close of 99.25 before the Bank of Japan stepped in. Dealers blamed institutions adjusting their currency holdings for the half-year end. The intervention took the Japanese authorities' spending on supporting the dollar this month to about $9bn (pounds 5.7bn), just less than the $9.7bn it spent buying dollars in August.
German finance minister Theo Waigel restored some calm to the European currencies by spelling out again his view that the deadline for the single currency should not be postponed, and the Maastricht criteria must be met. He also denied newspaper reports that he would move to the foreign ministry in a cabinet reshuffle.
However, the French franc fell sharply after figures showed an unexpected rise of 27,000 in the unemployment total in August. Alain Juppe, the prime minister, said the trend in unemployment was still improving. But the figures were unsettling, coming after his statement on Thursday that France faced a situation of "national peril" due to weak government finances. The franc fell to a low point of 3.4573 against the mark, but recovered to 3.4468. The Swiss franc also dipped yesterday, although it remained above the psychologically important 0.80 to the mark level.
After mixed signals from US economic statistics the dollar recovered in New York trading. GDP growth in the second quarter was revised up to 1.3 per cent from an initial estimate of 1.1 per cent. But new home sales fell in August after strong rises in the preceding two months. At midday the currency had climbed back to just over 99 and had risen to DM1.4290.
The pound ended the day slightly stronger. Its index against a range of currencies rose 0.1 to 84.7. As expected, there was no rise in base rates after the monthly meeting between Kenneth Clarke, Chancellor of the Exchequer, and Eddie George, Governor of the Bank of England.