Rate Hike Weakens Dollar

The dollar weakened Wednesday, hurt by a smaller-than-expected increase in interest rates and skepticism over President Clinton’s revamped bailout plan for Mexico’s economy.

The Federal Reserve’s policymaking committee raised short-term rates by a half percentage point to 6 percent, but many financial traders had expected a three-quarters point increase.

Moreover, currency traders said the Fed’s announcement implied that its series of rate increases wasn’t over. The net effect was to weaken the U.S. bond market. The dampened demand for bonds diminished demand for dollars needed to purchase them.

Exchange Currency in Dollars Dollar in foreign currency

Canada .7091 1.4102 France .1896 5.2750 Germany .6575 1.5210 Great Britain 1.5805 .6327 Japan .010081 99.20