The Bank of Japan yesterday accomplished what the US Federal Reserve could not manage on Monday, and brought calm to the currency markets with several rounds of successful intervention to buy dollars.
The US currency ended higher against the yen and mark in European trading, and was flat in New York in late afternoon. The Bank of Japan's action lifted it from the latest record low of Y85.55 to Y86.35.
Tensions between the mark and other European currencies eased as well. The pound ended the day at DM2.2155, where it had started, and its trade weighted index fell 0.2 to 84.8.
Many dealers in the currency markets saw yesterday's calm as a temporary reprieve. Nick Stamenkovich at the securities firm DKB International in London said the market was consolidating for the time being. The Fed and Bank of Japan intervention had fended off aggressive dollar sellers.
Last week's unexpected interest rate cut in Germany has helped to take pressure off the dollar. The announcement yesterday that US trade talks with Japan on cars will reopen on 17 April also helped to improve sentiment.