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Reducing dollar's gyrations. Group of Five seeks accord on currencies and economic growth

The world's major economic powers may be taking a tiny step toward a more managed international economic system. Finance ministers and central bankers of the Group of Five - the United States, West Germany, Japan, Britain, and France - have scheduled a meeting in Paris for Saturday to discuss details of a tentative agreement.

``It will be one small step toward a better-managed float,'' says Robert Hormats, a vice president of Goldman Sachs & Co. and former government official involved in international economics.

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He was speaking of the current system where the relationship between the US dollar and other currencies of the major industrial countries ``floats'' on the foreign exchange markets according to the supply and demand for those currencies.

As reported from Washington, the US and its allies have reached a rough accord aimed at reducing the dollar's price gyrations in return for vows by West Germany and Japan to consider new measures to stimulate their economies. News of the potential accord strengthened the dollar yesterday on foreign exchange markets.

For domestic political reasons, governments have enormous difficulty adjusting economic policy to take account of international considerations. Thus international economic cooperation of the industrial nations has often been more talk than action.

Nonetheless, a coincidence of domestic and international concerns could be making an agreement possible.

Because of the sharp increase in the value of the yen, Japanese exports and the domestic economy have stagnated. Thus, it is now in Japan's own interest to meet the request of US Treasury Secretary James A. Baker III that it stimulate its domestic economy to encourage more imports from abroad.

Possibly the Japanese will agree to lower their central bank discount rate from 3 to 2.5 percent and beef up a recently-announced package of domestic spending.

Similarly concerned now about a slowdown, West Germany may advance the date of a 10 billion deutsche mark (US $5.5 billion) tax cut, now scheduled for Jan. 1, 1988, and enlarge it to 15 billion marks.

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The US administration may promise to continue pressing to reduce the federal government's massive budget deficit and to resist protectionist trade legislation in Congress.

Together, the Group of Five could agree on some weak form of ``reference zones'' for the dollar, the mark, and the yen based around the current prices of these currencies.

If any of these currencies violate the upper or lower price limits of these zones, the Group would agree to consult on what economic policies should be taken to return the currencies to this band. They may agree to intervene in the foreign exchange markets directly by buying or selling currencies.

However, all sides have reasons to want to leave the deal rather flexible.

For example, if the current weakened dollar fails to cure the huge balance of payments deficit of the US as anticipated, Mr. Baker may want to see the dollar go even lower.

West Germany's central bank will not want international affairs to jeopardize its low-inflation domestic policy.

On Sunday, officials from Canada and Italy are expected to join the representatives from the Five to discuss and ratify the deal.

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