Dollar Falls on Lower Interest Rates

The dollar, undermined by lower U.S. interest rates, fell against major foreign currencies Tuesday.

Gold prices also declined. Bullion was bid at $328 an ounce as of 4 p.m. EST at Republic National Bank in New York, down $1 from Monday.

“The dollar was relatively quiet for most of the day but closed on a weak note basically in reaction to lower short-term interest rates,” said David Arbesman, a first vice president with Prudential-Bache Securities Inc. in New York.

The federal funds rate, what banks charge each other for overnight loans, fell to 8% from 8 3/8%. The yield on the three-month Treasury bill fell to 7.98% from 8.04%.

Lower interest rates make dollar-denominated investments less attractive.

Arbesman added:

“The general market sentiment is anti-dollar as the market still has fears of possible further bank failues in the S&L; area and more failures in the government securities industry.”