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Dollar's rise hits exporters
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October 31, 1996: 9:02 p.m. ET
The U.S. dollar is nearing a 3-1/2- year high against the Japanese yen
From Correspondent Ceci Rodgers
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NEW YORK (CNNfn) -- Foreign exchange trading was subdued ahead of the October U.S. jobs reports Friday. But the dollar's recent strength is fueling worries in the Midwest's export-heavy manufacturing industries. Meanwhile, U.S. policymakers continue to tolerate the rising greenback.
The surge in the U.S. dollar is cutting into manufacturing profits. A family-owned steel company in Chicago has seen once red hot Japanese sales go into the deep freeze.
"We were selling products in 1994-1995 into Japan when the yen was high against the dollar. As the dollar strengthened, those sales have basically disappeared," said Joseph Curci, chief financial officer at A. Finkl & Sons.
The dollar has risen 12 percent against the Japanese currency in the past year, hitting a more than three year high this week. The dollar's rise against European currencies has been more moderate, up seven percent against the German mark.
Companies that suffer most, such as steel, chemical, heavy equipment, aircraft manufacturers, and big three auto companies, are those that compete with Japanese firms head to head on price.
"It's had a significant, major impact on a lot of industries that are trying to export and compete abroad, and the jobs related to them," said Jerry Jasinowski, chief economist for the National Association of Manufacturers.
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The big three are worried the Japanese will begin slashing prices on their cars. Analysts say the weak yen could allow the Japanese to offer discounts of up to $1,000 per car.
Detroit is complaining to Washington policymakers, who so far are insisting they don't mind a strong dollar.
"I think it will be a very interesting test of the fealty of the American officials to their qoute, "strong dollar mantra," to see what they do after the election if the yen continues to weaken," said Fred Bergsten, director of the Institute for International Economics.
This week on CNN's Moneyline with Lou Dobbs, Treasury Secretary Robert Rubin emphasized the upside to a strong dollar. Namely, lower U.S. inflation and interest rates.
That is no small consideration, since overseas central banks have increased their holdings of U.S. Treasury securities by 25 percent this year -- meaning U.S. exporters may have to take it on the chin to protect against the potentially dangerous impact of a falling dollar.
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