Word: yen
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PRESIDENT NIXON won three major victories last week in defense of his new economic policies. Japan finally floated its yen in relation to the dollar; organized labor, led by A.F.L.-C.I.O. President George Meany, backed off from its threat to contest the wage-price freeze in court; and, after a brief show of defiance, Texas conceded that the freeze covers state and local government employees. Some of the week's other highlights...
...expected 12% to 15%. At the close of trading last week, the franc had risen by 2.8% in relation to the dollar, the mark by 7.6%, the Swiss franc by 2.5%, and the pound by 3%. Put on a limited float at week's end, the Japanese yen rose as much as 7% in the first day's trading...
...only decisive development came at week's end from Tokyo. After two weeks of agonizing over the Nixon pressure and several times denying flatly that the yen would be revalued, the government of Prime Minister Eisaku Sato finally announced that it would allow the Japanese yen to float against the dollar. This was probably an unavoidable decision for Sato, but it was especially painful and will produce wide-ranging economic woes for Japan. By in effect increasing the price of the yen, Sato dulled the cutting edge of Japan's export drive, not only in the U.S.-which...
Just how widely the yen will be allowed to fluctuate is not yet clear; the Bank of Japan said it would intervene to prevent too drastic a swing, at least for now. On the first day of the limited float, the yen was traded at an increase of 5% to 7% over the old rate, but just where it will settle is still uncertain. Japanese officials noted that the flotation was only a temporary measure, but U.S. importers were already predicting that the higher yen rate on top of the 10% surtax could effectively close the American market to Japanese...
Drifting Downward. U.S. Administration officials saw the Japanese decision to set the yen adrift among the world's currencies as a tangible sign that the Nixon moves are succeeding-but they emphasized that it was no more than a first step. European reaction to the Japanese announcement, which came within hours of the close of business Friday, was a mixture of surprise and bewilderment. In West Germany the dollar had not declined in early trading. But as the week progressed, rumors began to circulate that the International Monetary Fund, the clearinghouse established at Bretton Woods in 1944, would eventually...