Shrinking Trade Gap Boosts Dollar

Fri., Dec. 20, 1996

The dollar strengthened Thursday on new fears of economic weakness in Japan, a surprise drop in the U.S. trade deficit and a rebound on Wall Street that pushed stocks back toward record levels.

The combination of a spill in the Tokyo stock market and rally in this country suggested that more Japanese investors were moving holdings out of Japan and converting yen to dollars, raising demand for the U.S. currency.

The Dow Jones industrial average surged nearly 127 points Thursday, while Japan’s Nikkei Stock Average fell to its lowest level of the year.

“There’s an asset shift from Japan to the United States,” said Thomas Arnold, a trader at the New York branch of Dai-Ichi Kangyo Bank. “That would be my suspicion.”

Currency in Dollar in Exchange Dollars foreign currency

Canada .7303 1.3685 France .1901 5.2610 Germany .6422 1.5572 Great Britain 1.6647 .6007 Italy .000653 1532.50 Japan .008769 114.04 Mexico .127340 7.8530

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Shrinking Trade Gap Boosts Dollar

Jesse Tinsley

Jim Meehan

Molly Quinn

Rob Curley

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