Fed steps in to steady dollar

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The Independent Online
THE FEDERAL Reserve yesterday intervened to stem the latest slide in the dollar and brought to a halt a sharp slide in US bond prices prompted by a fresh outbreak of American inflation fears, writes Peter Torday.

In several rounds of intervention, confirmed by Lloyd Bentsen, the Treasury Secretary, the Fed stepped into the market at DM1.6585 and Y101.55 to end what he called excessive volatility. Hedge funds were reported selling dollars on Thursday after the latest inflation data, pushing the dollar a pfennig lower and close to a record low against the yen before the Fed intervened.

Bond prices had fallen almost three points since Thursday's first- quarter GDP figures, which disclosed a doubled inflation rate as measured by a gauge of domestically generated costs to an annualised 2.6 per cent. Bond prices and gilts steadied after the Fed action.

The Fed was also believed to have bought Treasury notes and other Group of Seven central banks are thought to be ready to support their bond markets.