Dollar Drops in Assault by Europe Banks

The dollar plummeted in frenzied trading today after a concerted assault by European central banks, which were estimated by currency dealers to have dumped $1.5 billion on world foreign exchanges.

The dollar had started retreating from record heights late Tuesday in the United States after Federal Reserve Chairman Paul A. Volcker questioned whether central bankers had practiced intervention “forcefully enough” to have an impact.

Traders said there was nothing timid about today’s intervention, which was led by West Germany’s Deutsche Bundesbank and included all major European central banks except Switzerland’s.

By the end of the European trading day, the dollar had lost more than 14 pfennigs against the West German mark, nearly 43 centimes against the French franc and 105 Italian lire.

“In my experience I’ve never seen a market like it--it’s incredible,” said Trevor Cass, a dealer at Barclays Bank in London.

The British pound, which fell to an all-time low of $1.0395 during trading Tuesday, climbed as high as $1.1065 in London before stabilizing today. The pound closed in London at $1.0885.

Gold prices climbed in nervous trading in response to the dollar’s decline.

In Zurich, Europe’s biggest bullion market, gold closed at a bid of $290.50 an ounce, up from $285.50 late Tuesday. In London, gold closed at $290.00 an ounce, up from $287.20.