Dollar Stages Sharp Retreat
The dollar staged a sharp retreat late Friday as new evidence of sluggish economic growth in the United States raised expectations of further declines in American interest rates.
A decision by Nebraska banking officials to close four banks because of problem loans had little impact on late trading, but analysts said it could lead to more declines in the dollar when markets open next week.
Gold prices, which fell in Hong Kong and were mixed in Europe, rose later in the United States and the dollar retreated. Republic National Bank of New York said gold bullion was bid at $316 an ounce as of 4 p.m. EDT, up $3 from the late bid Thursday and a gain of $1.50 from the end of the previous week.
The dollar’s declines, including a drop of nearly 2 cents against the British pound, came in exceptionally light trading attributed to the typical lull before the weekend that also happened to fall at the end of the month and during a convention of senior foreign exchange dealers in Toronto.
The Federal Reserve Board said its index of the dollar against 10 other currencies dropped 1.01% on Friday and was down 1.43% for the week.
Before the late slide, the dollar had turned in a mixed performance.
In Tokyo, the dollar rose to 251.78 Japanese yen from 251.63 yen Thursday and 251.15 yen last Friday. Later Friday in London, the dollar was quoted at 251.85 yen, but by the end of the trading day in the United States, the dollar had slipped to 250.55 yen from 251.825 yen late Thursday.
James McGroarty, a vice president at Discount Corp. of New York, said the dollar fell after the Commerce Department reported that U.S. factory orders fell 0.5% in April, the third straight monthly decline.
He said one surprise in that report was a revision of earlier figures on orders for durable goods, items such as cars and appliances that are designed to last at least three years. The government said orders for durable goods fell 0.2% in April rather than rising 1% as reported earlier.
If growth remains sluggish and loan problems continue to plague U.S. banks, he said, there would be further incentives for the Federal Reserve Board to lower interest rates.
Another Commerce Department report, meantime, said that the U.S. trade deficit widened to $11.9 billion in April from $11 billion in March and that the trade gap for the first four months of the year was larger than a year earlier, when it was rising to record heights.
Commerce Secretary Malcolm Baldrige noted that the dollar has fallen about 7% from its February peak. But he said the decline so far “is not enough to improve U.S. competitiveness and should have only a limited effect on our balance of trade.”
David Arbesman, a first vice president at Prudential-Bache Securities, said that selling picked after the economic reports were released. He said that, with the market thin and illiquid, traders holding dollars scrambled to sell as the dollar quickly fell through levels viewed as important by traders who follow charts of exchange rates.
The British pound rose to $1.2870 in London from $1.2745 late Thursday and $1.2572 last Friday. Later in New York, sterling jumped to $1.29375 from $1.2740 late Thursday.
Other late dollar rates in Europe, compared to late rates Thursday and to last Friday’s rates in parentheses, included: 3.0675 West German marks, down from 3.0810 (3.0885); 2.5965 Swiss francs, up from 2.5940 (2.5975); 9.3950 French francs, up from 9.3787 (9.4187); 3.4840 Dutch guilders, up from 3.4675 (3.4855); 1,971.00 Italian lire, up from 1,965.50 (1,971.00), and 1.3760 Canadian dollars, unchanged (1.3745).
Dollar rates in New York as of 4 p.m. EDT, compared to rates late Thursday, included: 3.0530 West German marks, down from 3.0855; 2.5630 Swiss francs, down from 2.6025; 9.3050 French francs, down from 9.4050, and 1.37145 Canadian dollars, down from 1.3761.
Gold bullion fell $1.65 in Hong Kong to close at a bid of $314.02 an ounce.
In Europe, gold rose $1.70 in London to a late bid of $315.70 an ounce, but gold fell $1 in Zurich to $313.50.
On the New York Commodity Exchange, gold bullion for June delivery rose $3 to close at $316.20 an ounce, winding up the week with a gain of $1.70.
