Dollar Continues to Falter in World Currency Markets : Disappointment in 7-Nation Agreement Pushes Yen to Post-World War II Record High in Hectic Global Trading

WASHINGTON — The dollar resumed its slide Thursday as market disappointment over the latest seven-nation currency stabilization agreement pushed the Japanese yen to its highest level against the dollar since the yen was realigned after World War II.

As hectic currency trading moved around the globe from Tokyo to Europe and then to New York, the dollar’s value steadily deteriorated, despite intervention by Japan’s central bank and the U.S. Federal Reserve aimed at braking the descent. In New York, the dollar closed at 143.95 yen, just above the day’s low of 143.90, and down sharply from 146.05 at Wednesday’s close.

And even though the dollar had been relatively stable against most other currencies in recent weeks, it fell against the West German mark as well, closing at 1.8190 marks from 1.8300 Wednesday.

Renewed Commitment

Other financial markets also reacted badly to the dollar’s decline, as investors feared that the Fed may be faced with no choice but to push up interest rates to end the exodus from the dollar.

The chaotic markets followed a meeting late Wednesday by finance ministers of the United States, Japan, West Germany, Britain, France, Italy and Canada, known as the Group of Seven, at which they renewed the commitment made Feb. 22 in Paris to cooperate to stabilize major currencies “at around current levels.”

Italian Finance Minister Giovanni Goria said foreign exchange markets had asked the Group of Seven what they would do to protect the dollar, and they “found the answer was weak.”

At the moment, and until there is solid evidence that massive trade imbalances among the leading industrial nations are clearly on the mend, monetary officials appear to be relatively powerless to prevent the dollar from declining further, particularly against the yen.

Stimulus Package

“The dollar is going lower. The market’s objective is 140 yen. It’s only a question of when,” a trader at a major U.S. bank told Reuters news service. “The Fed intervention cannot really do any good in this market.”

Against the West German mark, the dollar had been steadier until yesterday, falling only slightly from its late-February level of 1.8305 marks.

Japan’s ruling party, under pressure from the United States and its other major trading partners to reduce its huge trade surplus, announced a decision this week to press for a massive $34.5-billion economic stimulus package aimed at boosting domestic spending and reducing the nation’s dependence on exports for economic growth. But it could be months before the slow-moving Japanese political system actually puts the package in place.

The joint statement issued Wednesday night after the high-level meeting of finance officials from the seven leading industrial democracies--by singling out Japan’s stimulus package for special praise--implicitly put Japan on notice that other nations expect it to implement the plan quickly.

The increasing pressure on Japan, combined with the recent decision by the Reagan Administration to impose $300 million in tariffs against Japanese electronics concerns in retaliation for failing to live up to a semiconductor trade agreement, heightens the importance of Prime Minister Yasuhiro Nakasone’s visit to Washington at the end of this month.

Treasury Secretary James A. Baker III, speaking before the policy-making panel of the 151-nation International Monetary Fund, warned that current trade imbalances “simply are not sustainable.”

While Baker holds out hope that Japan’s recent decision represents a breakthrough in his relentless effort to prod both Japan and West Germany into faster growth as the best means to help stabilize currencies, market participants apparently did not consider the announcement enough to allay concerns that the dollar will have to weaken further.

In an effort to counter investor fears that the Fed might have to force up U.S. interest rates, which could threaten a possible economic downturn, Nigel Lawson, the British chancellor of the exchequer, suggested that other nations could cut their rates to relieve the pressure on the dollar.

With little now expected from cooperative government action until early June, investors are expected to focus attention on next Tuesday’s release by the Commerce Department of February trade statistics. According to analysts, the dollar is likely to fall further if the government announcement discloses that the U.S. trade deficit exceeded $13 billion.