U.S. TRADE DATA SEEN AS KEY TO DOLLAR TREND
The dollar's recent signs of stability
have raised hopes that its 27-month decline may be nearly over,
but most currency analysts refuse to commit themselves until
after the June 12 release of U.S. trade data for April.
    "The trade data will be a deciding factor to see if the
dollar has bottomed out," said Jim McGroarty of Discount Corp.
    Since February 1985, the dollar has nearly halved its value
against the yen and the mark as part of an officially
orchestrated campaign to make U.S. goods more competitive on
world markets and redress gaping world trade imbalances.
    On April 27, the dollar fell to a 40-year low of 137.25 yen
but has enjoyed a modest recovery over the last few weeks,
topping 145 yen today for the first time in nearly two months.
    Many economists now believe that the dollar has fallen far
enough to ease the trade deficit's drag on the U.S. economy.
    The U.S. trade gap narrowed to 13.6 billion dlrs in March
from 15.1 billion in February and is expected to show continued
improvement in April in volume, if not in real, terms.
    Keiichi Udagawa of Bank of Tokyo in New York said that if
further progress is reported, the dollar would head back up
towards 150 yen.
    "There is growing consensus that the dollar has bottomed
out for the medium term," added Tom Campbell of First National
Bank of Chicago.
    Other factors supporting this bullish view were growing
expectations that Federal Reserve Chairman Paul Volcker would
be reappointed for a third four-year term in August, Japan's
larger-than-expected economic stimulus package last week and 
more favorably technical chart signals, analysts said.
    The dollar was also aided by Japan's moves to dampen
speculative selling in Tokyo and by reports of active central
bank intervention to support the dollar.
    The Federal Reserve Bank of New York said last week that
the U.S. monetary authorities bought more than four billion
dlrs during the February-April period -- the largest amount
since the dollar crisis of the late 1970's.
    Discount Corp's McGroarty described the Fed's intervention
volume as "impressive".
    James O'Neill of Marine Midland Bank was not so positive,
however: "the dollar has not yet bottomed out. After the trade
data are released, the dollar could fall towards 1.77 marks and
140 yen."
    Similarly, Natsuo Okada of Sumitomo Bank in New York
warned, "I don't think the dollar has bottomed out yet."
    Although the dollar could rise as high as 146.50 yen, Okada
said market impatience about the painstakingly slow decline of
the U.S. trade deficit may lead to renewed pressure.
    Currency analysts also warned about an unfavorable reaction
to the seven-nation economic Summit on June 8 to 10 in Venice,
which is likely to focus on the implementation of previous
commitments rather than yield any fresh initiatives.
    President Reagan said today, "economic policy decisions
made last year in Tokyo and at this year's meetings of Group of
Seven finance ministers in Paris and Washington cannot be
ignored or forgotten."
    "The commitments made at these meetings need to be
translated into action," he added in a speech, celebrating the
40th anniversary of the Marshall aid plan for Europe.
    Now that Tokyo has unveiled its fiscal stimulus package,
analysts expected Bonn and the dollar/mark rate to bear the
brunt of U.S. calls for further action.
    Marine Midland's O'Neill said, "pressure will build up on
Germany to take stimulative action like Japan."
    Some Japanese bank dealers warned that although the dollar
could hold above 145 yen for some months it could also come
under attack again if it seems the latest economic package is
not having much impact on Japan's economy and its trade
surplus. Reflecting a longer-term uncertainty, some some trust
banks and Japanese insurers are keeping their short dollar
positons hedged against exchange losses in their foreign
portfolios, while some others have started covering those short
positions, Japanese bank dealers said.
 Reuter
