Justice Department Investigates Banks On Charges of Currency Manipulation

WASHINGTON D.C.--The government is investigating charges that leading banks in the United States conspired to drive down the value of the U.S. dollar on foreign money markets in order to gain windfall profits, a Justice Department official said yesterday.

The official, who asked not to be identified, said the investigation began about two months ago and is focusing on charges that major American banks "acted in concert" to drive down the dollar's value on international markets.

If the allegations are accurate, the banks could be charged with price fixing violations under the Sherman Anti-Trust Act, the official said.

The officials cited David Edwards, a former employee of Citibank, who alleges that Citibank and other major banks capitalized on the dollar's weakness by selling dollars one day, then buying them back the following day after they declined in value.

News of the investigation came as President Carter announced steps aimed at halting the declining value of the dollar overseas.

Carter yesterday ordered an unprecedented increase of a full percentage point in the lending rate at the nation's central bank, arranged to borrow up to $30 billion in foreign currencies to buy dollars that are unwanted abroad and ordered an increase in the sale of U.S. gold reserves.

The two-year slide in the dollar is unwarranted and must be stopped because it "threatens economic progress at home and abroad and the success of our anti-inflation program," Carter said.

Carter's plan touched of a rally in the stock market yesterday that carried the Dow Jones industrial average to its largest gain in history.

The Dow Jones average of 30 industrials, which fell 104 points in the last 12 trading days, climbed 35.34 to 827.79, The largest previous single-day gain for the Dow occurred on August 16, 1971 following then-President Richard M. Nixon's announcement of several economic measures.