The dollar soared against all major foreign currencies Friday, prompting a third but unsuccessful wave of central banks' intervention in a week.
The Federal Reserve Bank of New York intervened at least twice Friday against the dollar following a similar move by a number of European central banks, led by the Deutsche Bundesbank.Central banks, however, failed to stem the dollar's surge, which gained further momentum from the intervention's demise to break through key resistance levels many analysts regarded as unthinkable only a week ago.
The dollar reached highs for the day of 1.6095 German mark, 137.95 Japanese yen and 1.3960 Swiss franc, while the British pound bottomed out at $1.8140.
With only a few hours of trading left ahead of a crucial referendum in the Soviet Union, dollar buying dominated the market Friday on an odd combination of hard facts and baffling enthusiasm.
The European Monetary System, which recently came under pressure because of the wide French franc-Spanish peseta spread, received some relief from the Bank of Spain, which early Friday cut its key interest rate to 13.5 percent from 14.5 percent.
The move by Spain's central bank gave more credence to the scenario where interest rates would bottom out in the United States and decline in a number of European countries, analysts said.
"It is a complete reversal of the dollar, investors do not want to be caught long on marks and short on dollars ahead of the referendum in the Soviet Union Sunday," said Albert Soria, first vice president foreign exchange with Kansallis Osake Pannki.
If the referendum favors the end of the union of the 15 Soviet republics, this could raise concern over the repayment of $41 billion in loans by European and Japanese banks.