Dollar Hits Highest Level in a Month; Gold Mixed

The dollar staged a broad advance Thursday, reaching its highest level in a month with the help of growing expectations of renewed economic strength and rising interest rates in the United States.

Gold prices were mixed on world bullion exchanges. Republic National Bank in New York said that gold bullion was bid at $313.75 an ounce, up 75 cents from Wednesday’s bid.

With the latest spurt, the Federal Reserve Board’s measure of the dollar against 10 other major currencies has rebounded 5.6% in the past two weeks. Prior to that rally, the dollar had plunged 12.4% from the record heights reached in late February.

The dollar stood at 152.29 on the Fed index, up 1% from Wednesday and its highest level since April 5. The index stood at 100 in March, 1973.

Psychological Factor

Currency analysts attributed the dollar’s rebound to a change of investor psychology.

“The market seems to believe that the U.S. economy will show a substantial improvement in the second and third quarters of 1985,” said Gary Dorsch, a foreign exchange analyst at Oppenheimer Rouse Futures in Chicago. At the same time, he said, traders expect European economic activity to lag.

Dorsch also said traders believe that a heavy schedule of government borrowing, including record sales next week of U.S. Treasury notes and bonds, will keep interest rates from falling in the United States.

A strong economy and high interest rates in the United States would keep returns attractive on dollar-denominated investments and spur demand for dollars, analysts said.

But Leslie Puth, a trader at Irving Trust in New York, said that, since the dollar has been climbing on expectations for the future, “it could pose a problem if second-quarter statistics are not as rosy as anticipated.”

Traders said the dollar paused briefly in its rally after E. F. Hutton & Co., a large securities firm, paid a $2-million fine and pleaded guilty to 2,000 counts of mail and wire fraud in connection with a scheme to intentionally write checks in excess of funds on deposit at more than 400 banks in the United States. But after dipping for about an hour, the dollar resumed its rise.

Holiday Closings

A Federal Reserve report late in the day of a $2.7-billion rise in the basic U.S. money supply in the week ended April 22 had little impact on trading.

Meanwhile, trading picked up after the May Day holiday, which had closed many European currency exchanges Wednesday.

As the trading day began in Tokyo, the dollar slipped to 252.40 Japanese yen from 252.50 yen Wednesday. Later in London, however, the dollar rebounded to 253.22 yen and, by the end of the trading day in the United States, the dollar had settled at 252.875 yen, against 252.125 yen late Wednesday.

The British pound fell against the dollar, with sterling dropping to $1.2182 in London from $1.2210 on Wednesday. Later in New York, the pound slipped to $1.2175 from $1.23225 late Wednesday.

Other late dollar rates in Europe, compared to late rates Wednesday, included: 3.1625 West German marks, up from 3.1435; 2.6635 Swiss francs, up from 2.6365; 9.6850 French francs, up from 9.5850; 3.5765 Dutch guilders, up from 3.5515; 2,021.50 Italian lire, up from 2,007.00, and 1.3740 Canadian dollars, up from 1.3686.

Gold Prices

Dollar rates in New York after the release of the money supply figures, compared to late rates Wednesday, included: 3.1735 West German marks, up from 3.1285; 2.6640 Swiss francs, up from 2.6255; 9.6750 French francs, up from 9.5425, and 1.3748 Canadian dollars, up from 1.36805.