Dollar Rallies for 2nd Straight Day

Speculation that the recent decline in interest rates may be over sent the dollar rocketing upward Wednesday, a day after the U.S. currency’s biggest one-day advance in 3 1/2 years. Gold prices were steady.

The two-day rally was the currency’s first sustained upsurge since late February, when it completed a month-long record-smashing binge.

After reaching record heights on Feb. 25, the dollar had plunged 12.4% through last Thursday.

In London on Wednesday, the dollar gained three cents against the British pound to add to the 2 1/2-cent advance on Tuesday. In Frankfurt, the U.S. currency climbed six pfennigs, matching a similar gain Tuesday.

Trading was described as active and volatile.

Dealers attributed the jump in part to the government’s report Tuesday that consumer prices in the United States rose 0.5% in March, the highest monthly rise since January, 1984.

This fueled speculation that the U.S. Federal Reserve would keep a tight grip on credit policy, which would tend to keep upward pressure on interest rates.

Analysts also said the currency was bid up by speculators who had earlier bet on further declines and were forced to scramble either to lock in profits or limit losses.

Traders appeared to be ignoring evidence that the U.S. economy is slowing down. The government reported Tuesday that durable goods orders fell 2.3% last month, the third decline in four months.

In Tokyo, the dollar closed at 250.10 Japanese yen, up from Tuesday’s 248.45 yen. Later, in London, it was quoted at 250.35 yen.

In London, the British pound was quoted at $1.2270 compared with $1.2560 late Tuesday. At one point during the session, it traded as low as $1.2150.

Other late dollar rates in Europe, compared to late rates Tuesday, included: 3.1100 West German marks, up from 3.0525; 2.5840 Swiss francs, up from 2.5125; 9.4750 French francs, up from 9.2475; 3.5325 Dutch guilders, up from 3.4355; 1,986.50 Italian lire, up from 1,935.50, and 1.3608 Canadian dollars, up from 1.3545

Gold prices were comparatively stable in quiet trading after a selloff late Monday in New York, dealers said.

In London, gold finished at $322.75 an ounce, compared with the late bid Tuesday of $326.30.

In Zurich, the late bid was $321.50 an ounce, compared with $326.50 Tuesday.

Earlier in Hong Kong, gold fell $2.58 to close at $323.95 an ounce.

Silver was quoted in London at a late bid of $6.19 a troy ounce, down from Tuesday’s $6.285.