The dollar fell against most major currencies Friday on profit taking by traders disappointed that the dollar didn't rally this week despite evidence of slowing European and Japanese econ-omies.
The dollar fell against both the German mark and the Japanese yen after the greenback spent the day rising and falling against both currencies.With the dollar upwardly mobile for the past few months, traders had anticipated that the weakening economies of Europe and the need to fix Japan's four-year downward tilt would spark the dollar's growth for some time.
But when the German central bank allowed one of its key interest rates to drop Wednesday, the dollar didn't jump. The German central bank also disappointed the markets Thursday when its policy-making committee didn't cut official rates.
"It is profit taking and a certain amount of frustration," said the senior foreign exchange analyst at the Boston office of Technical Data.
By 4 p.m. in New York, the dollar was trading at 1.4823 marks, compared with 1.4875 on Thursday. It finished at 106.55 yen, compared with 106.75 the day before.
In a thin market such as Friday's, small trades can have an exaggerated effect on the market.
The dollar's weakness against the yen was also partly the result of heavy yen buying by hedge funds, which had sold marks after the German currency failed to continue its advance against the yen.
David Solin, a partner at Foreign Exchange Analytics, an investment advisory firm, said the hedge fund selling coincided with a New York Times article that said American car manufacturers preferred that the dollar halt its gain. The car makers said they would be at a price disadvantage with Japanese automakers.