The dollar closed higher in quiet trading Friday as traders prepared themselves for Sunday's meeting in London of finance ministers from the Group of Seven industrial nations.
Against the German currency, the dollar closed at 1.8025 marks, up from Thursday's 1.7915 marks. The dollar closed at 138.95 Japanese yen, compared with 138.25 yen Thursday.Robert White, foreign exchange manager of First Interstate Bank in Los Angeles, said that most analysts and traders were skeptical that the G-7 ministers would come up with a strong package to curb the dollar's strength.
Other analysts said it would be difficult for the G-7 to coordinate interest rate changes or mount a strong concerted intervention effort, given the divergent domestic priorities of G-7's member nations.
The U.S. Treasury, for example, wants lower interest rates to ensure economic recovery, while Germany's Bundesbank worries about German inflation and the mark's recent weakness.
Japan wants a stronger yen on the one hand but also wants to cut interest rates on the other.
The Federal Reserve seems to be leaning toward leaving monetary policy steady, believing the economy has begun to recover or will do so shortly. Fed Chairman Alan Greenspan warned on Tuesday that a depreciating dollar carries costs for the economy.
The market's doubts that the G-7 will adopt a strong package to stabilize the dollar was reinforced by comments on Thursday from Bundesbank President-elect Helmut Schlesinger.
Most analysts said they expect the G-7 will produce a communique expressing members' hopes for currency stability and leave it at that.