CURRENCY : Dollar Drops Sharply After Big Central Banks Intervene

The world’s major central banks joined forces Monday to halt the dollar’s upward momentum, battering the currency to a sharply lower close in New York.

In U.S. trading, the Federal Reserve sold dollars on at least three occasions, including the sale of dollars for West German marks--the first such dollar-mark sales in the open market since October. The intervention followed aggressive dollar selling by nine European central banks, spearheaded by West Germany’s Bundesbank, in European trading.

The Bank of Japan also intervened early Monday for the seventh straight session to sell dollars in the Tokyo market, where the dollar also finished lower.

Despite the central banks’ intervention, dealers said the dollar remains well bid.

“I’m still betting on a stronger dollar,” said Robert Hatcher of Barclays Bank. “I don’t think the intervention we’ve seen is going to have a lasting impact.”

David Wilson of Girozentrale New York downplayed the risk of a big dollar drop. “It’s going to take a real effort by the central banks this time,” he said.

The yen had been weakening amid political uncertainty and stock market turmoil in Tokyo that caused money to pour into dollar-denominated investments.

The mark had been hurt by concern over the potentially inflationary impact of German unification.

“Until we know exactly what the affects of the union are, the mark will be weak,” said Albert Soria of Kansallis-Osake-Pankki.

Traders said there was no economic news that affected trading Monday.

In Tokyo, the dollar closed at 149.95 yen, up 0.20 yen from Friday’s close. Later in London, it traded at 149.75 yen, down from 150.28 yen Friday. In New York, the dollar closed at 149.03 yen, down from Friday’s 150.15 yen.

In New York, the dollar ended at 1.6970 West German marks, down from Friday’s close at 1.7150 marks.

In London, the British pound was quoted at $1.6390, down from $1.6515 late Friday. Later, in New York, the pound closed at $1.6445, cheaper than $1.6485 on Friday.