U.S. INTERVENED TO AID DLR IN JANUARY, FED SAYS
U.S. authorities intervened in the
foreign exchange market to support the dollar on one occasion
during the period between the start of November 1986 and the
end of January, the Federal Reserve Bank of New York said in a
report.
    The Fed's quarterly review of foreign exchange operations
said that the U.S. bought 50 mln dlrs through the sale of yen
on January 28. This operation was coordinated with the Japanese
monetary authorities and was funded equally by the Fed and the
U.S. Treasury.
    The Fed's intervention was on the morning after president
Reagan's State of the Union message and was "in a manner
consistent with the joint statement" made by U.S. Treasury
secretary James Baker and Japanese finance minister Kiichi
Miyazawa after their January 21 consultations.
    At that meeting, the two reaffirmed their willingness to
cooperate on exchange rate issues.
    The Fed's report did not say at what level the intervention
occurred. But on January 28, the dollar closed at 151.50/60 yen
after dipping as low as 150.40 yen earlier in the session. It
had closed at 151.05/15 yen the previous day.
    The dollar had plumbed a post-World War II low of 149.98
yen on January 19 and reached a seven-year low of 1.7675 marks
on January 28. It ended that day at 1.7820/30 marks.
    The Fed noted that, after trading steadily throughout
November and the first half of December, the dollar moved
sharply lower until the end of January.
    It closed the three-month review period down more than 11
pct against the mark and most other Continental currencies and
seven pct lower against the yen and sterling. It had fallen
four pct against the Canadian dollar.
    During the final days of January, pressure on the dollar
subsided. Reports of the U.S.-Japanese intervention operation
and talk of an upcoming meeting of the major industrial
countries encouraged expectations for broader cooperation on
exchange rate and economic policy matters, the Fed said.
    Moreover, doubts had developed about the course of U.S.
interest rates. The dollar's swift fall had raised questions
about whether the Fed would let short-term rates ease.
    Thus the dollar firmed to close the period at 1.8320 marks
and 153.70 yen. According to the Fed's trade-weighted index, it
had declined nine pct since the beginning of the period.
    The dollar had risen as high as 2.08 marks and 165 yen in
early November.
    The Fed last intervened in the foreign exchange market on
November 7, 1985 when it bought a total of 102.2 mln dlrs worth
of marks and yen.
    The Fed's action followed the September 1985 Plaza
agreement between the five major industrial nations under which
they agreed to promote an orderly decline of the dollar.
 Reuter
