Greenback Blues

Maybe they didn't like George Bush's speech, or maybe they were worried about European integration. Or maybe they just felt dyspeptic. Whatever the reason, currency traders dumped dollars by the billion late last week. A huge sell-off drove the greenback down as low as 1.4250 to the German mark, its lowest level since the deutsche mark was created in 1948.

The fall came despite nearly heroic efforts to stop it. No fewer than 17 central banks, including the German Bundesbank, the Swiss National Bank and America's own Federal Reserve, began buying hundreds of millions of dollars as the rate slipped below the 1.45 level that has triggered past rescue attempts. This time it hardly helped. By the close of trading in New York Friday, the dollar had recovered only to 1.4290. That, in turn, helped knock more than 50 points off the Dow Jones industrial average at Friday's close.

But if the dollar was stumbling, the Japanese stock market was practically falling on its face. The Nikkei Index dropped to 14,309, its lowest level since 1986, forcing the government to take action. The Finance Ministry announced new rules to discourage banks from dumping shares, which brought at least a temporary recovery. But critics said long-promised government spending programs are needed to make the recovery permanent.