Dollar Reaches New Highs in Europe; Gold Is Mixed

The dollar rocketed to new heights Tuesday against the currencies of Britain, Canada, France, Italy, Spain, Denmark, Finland and Sweden, extending a record-shattering rally.

“The dollar is following the path of least resistance, going higher,” said Gary Dorsch, a foreign currency analyst at Oppenheimer Rouse Futures Inc. in Chicago.

Gold prices were mixed in quiet trading. Republic National Bank in New York said gold bullion was bid at $302 an ounce as of 3 p.m. EST, down $1.75 from Monday.

Quiet Trading

The dollar’s gains came in relatively quiet trading, with many large banks in the New York closed in observance of Lincoln’s birthday.

But the advance remained broad-based, with the dollar climbing to a 13-year highs against the West German mark and Dutch guilder, a 12-year high against the Austrian shilling, a seven-year high against the Swiss franc and a 27-month high against the Japanese yen.

The Federal Reserve Board said in Washington that its trade-weighted index measuring the value of the dollar against 10 other currencies rose to a record for the eighth straight trading session.

Currency dealers attributed the dollar’s strength to a healthy economy in the United States and a belief that U.S. interest rates will remain high in relation to inflation, keeping dollar-denominated investments attractive.

The absence of intervention against the dollar by European central banks also spurred trader sentiment in favor of the U.S. currency.

The British pound fell to a record low of $1.0870 in London from $1.0975 on Monday amid fears that Britain’s government may raise interest rates for the third time in a month in a bid to make sterling more attractive. Later in the United States, sterling recovered slightly to $1.09075 but still was below Monday’s $1.09775 rate.