A Wild and Crazy Day for Foreign Exchange Trading

NEW YORK — “It’s 13-2. Thirteen-two! Great number. Let’s get ‘em.”

Suddenly, an eruption of cheers and high fives electrified the foreign exchange trading desk at Shearson Lehman Bros.

The moment had arrived.

America’s trade deficit, so dubious as an economic guide and yet more anxiously awaited than any other government figure, was out. And the news that Shearson’s chief foreign exchange trader, Fred Katzman, was belting out in trader shorthand exceeded even the rosiest expectations.

From October’s gloomy $17.6-billion deficit, the trade figure narrowed to $13.2 billion in November, giving anxious traders their best news in more than three months.

Wall Street had worked up a sweat in anticipation of the number. And with just 20 minutes to go before Friday morning’s announcement, the anxiety was at peak levels.

Tension Starts Early

While his traders chewed furiously on pencils, lit one cigarette after another or eased the tension by making last-minute bets for the office trade-figure pool, Katzman alternately paced and coached his traders.

“Remember, it’s not the same as last month,” he warned. “If the number’s bad, immediately (the dollar’s) going to come off a little bit. But it’s not going to dive down because of central banks.”

Katzman and his traders were working on the theory that if the trade figure was higher than expected, buyers would wait for the Federal Reserve Board and the central banks of other countries to buy dollars in order to lessen the impact of the bad news on already limping world financial markets.

With one minute to go, a cry of “gentlemen, start your engines!” echoed throughout the room and the din succumbed to tension.

At precisely 8:30 a.m., a single number flashed on the green-tinted computer screens around Shearson’s trading room: 13.2. Instantly, chaos broke out on the trading desk and the foreign exchange market’s Friday morning calm was shattered by suddenly frenetic trading.

Catapulting Dollar

“Don’t you know the trade figure just came out?” Katzman bellowed into one of the two phones pasted to his ears. “It’s bedlam here. Absolute bedlam.”

As buyers stopped the pussyfooting that had characterized the week’s trading and swamped the market, the embattled dollar leaped with each new order and the din in the trading room crescendoed.

“Sixty-four. Make that 66. Can you believe it? He’s trading 66. No. No. It’s 167 paid. Go in there.”

Twenty-two years in the business, and German-mark trader Lou Abbruzze, the man with the running commentary, was incredulous. Minutes before the trade figure became public knowledge, the dollar was trading at 1.64 marks on foreign exchange markets. Just 10 minutes after the announcement, it had jumped to 1.67 marks, an extraordinary climb.

Around the corner on the yen desk, the news triggered a similar buying wave--with the dollar spurting to 130 yen from 126 just before the announcement.

The dollar would continue its precipitous climb most of the morning. But for the traders on Shearson’s foreign exchange desk, the real action was over 30 minutes after it began.

In that brief time, Katzman estimated, Shearson had done about $200 million worth of business--most of it in individual orders averaging $200,000.

In the minutes and hours to follow, as investors and interbank dealers weighed the wisdom of buying more and selling out, the euphoria waned. The gap narrowed between the price sought and the price offered, and trading grew hazardous.

“This market is so crazy. It can’t decide if it wants to buy or sell,” said an exasperated Abbruzze. “It’s sickness. Pure sickness.”