The West Europeans and the Japanese are growing wary of the United States dollar's drop in value. Last September they agreed the dollar was too high-priced. At an unannounced meeting of the Group of Five in New York's plush Plaza Hotel, the finance ministers and central bankers of these five major industrial nations basically agreed to push the dollar's value down through intervention in the foreign-exchange markets.
But now they are nervous about its continuing fall. The value of the dollar peaked a year ago Tuesday. Since then, it has declined around 23 percent, according to a 14-currency trade-weighted index maintained by Morgan Guaranty Trust Company.
What bothers the Europeans and Japanese is the prospect that their strengthening currencies will damage exports to the US. Just as a weaker greenback helps American exports by making them less expensive to overseas buyers, it also discourages imports by making them relatively more expensive to US customers.
By making it easier for American companies to export goods, a lower-priced dollar will eventually reduce the massive US trade deficit -- $143.8 billion last year. But it also results in higher prices for imports and thus could boost inflation.
Paul A. Volcker, chairman of the US Federal Reserve Board, finds the potential for rising inflation rates troubling. He told a congressional committee last week that the slide in the dollar ``gives me some concern,'' adding that he doesn't want to see a loss of confidence in the dollar. So far, though, inflation has not accelerated much, partly because of the drop in oil prices. The consumer price index for January rose at a relatively modest 4.1 percent annual rate.
``The United States has been incredibly lucky to have this drop in oil prices at just the right time to offset the impact on prices of the decline in the dollar,'' says John Williamson, an economist with the Institute for International Economics in Washington.
``The dollar . . . could move perhaps a little more down,'' says Austrian Finance Minister Franz Vranitzky. ``But this would be enough.'' He was speaking of a 1 or 2 percent drop, an amount the dollar has nearly plunged since he spoke in an interview here Monday.
Similarly, a top French commercial banker, Bernard Thiolon, general manager for international activities of Credit Lyonnais, held that the dollar is now ``approximately in the correct range.''
Already Japanese exporters have had to boost the price of their automobiles and some electronic goods to offset the change in exchange rates. In Tokyo, government and business leaders have been voicing their fears for Japan's exports.
In a move to bolster the dollar, Japan's Ministry of Finance has been considering raising the ceiling on foreign bond investments by that country's life insurance companies from 10 percent of total assets to between 20 and 25 percent. If these financial institutions invest more money in the US, they strengthen the demand and price for dollars.
Whether that drop is sufficient to remedy the massive trade deficit of the US is a matter of controversy.
Though Mr. Volcker spoke of his concern about the dollar's rapid decline, Treasury Secretary James A. Baker III had said earlier that the Reagan administration ``wouldn't be displeased'' with a further drop. Economist Williamson held that it would be ``lovely'' if the dollar paused at its present level for a year or two before falling further. But he figures the authorities would be making a mistake deliberately to try to stop a further slump at the moment.
That, he says, could be ``dangerous,'' since the authorities probably would not be able to defend the current exchange rate of the dollar. If intervention by the central bankers failed, the dollar might plunge even further on the exchange markets.