Talk of Lower Oil Prices Hurts Dollar, Helps Gold

The dollar fell broadly in quiet pre-holiday trading Wednesday, buffeted by rumors about oil price cuts and concern about the strength of the economy in the United States.

The price of gold nudged higher. Republic National Bank of New York said gold bullion was bid at $310 an ounce as of 4 p.m. EDT, up 25 cents from the late bid Tuesday.

Currency and bullion dealers said trading was extremely light in advance of the Independence Day holiday today in the United States. Bullion markets will remain closed through Monday in the United States and only skeleton staffs are expected at U.S. currency trading centers Friday.

In thin markets, each transaction can cause large swings in exchange rates.

Typical of the dollar’s slide was its performance against the Japanese yen. In Tokyo, the dollar dipped to 248.13 yen from 248.20 yen Tuesday. Later in London, the dollar was quoted at 248.05 yen, and by the end of the trading day in the United States, the dollar had slipped to 247.925 yen from 248.045 yen late Tuesday.

David Arbesman, a first vice president for currency trading at Prudential-Bache Securities in New York, attributed much of the dollar’s decline to reports from Kuwait--later denied--of an agreement by a majority of OPEC members on a price cut of $1 or $1.50 a barrel in its top-grade crude oil.

Arbesman said that, when the report was denied by officials of the Organization of Petroleum Exporting Countries, the British pound turned higher and also lifted other currencies against the dollar.

The pound is closely tied to oil prices because of Britain’s large holdings of oil reserves in the North Sea.

The British pound rose to $1.3105 in London from $1.3042 late Tuesday. Later in New York, sterling rose to $1.3150 from $1.30745 late Tuesday.

Also affecting the dollar was a perception that U.S. economic growth will not be sharp in the months ahead, other traders said, something that would limit any increase in U.S. interest rates.

One factor helping support the pound are the double-digit returns available on sterling-denominated deposits at foreign banks, compared to single-digit yields on dollar-denominated deposits.

Other late dollar rates in Europe, compared to late rates Tuesday, included: 3.0350 West German marks, down from 3.0455; 2.5403 Swiss francs, down from 2.5480; 9.2325 French francs, down from 9.2775; 3.4165 Dutch guilders, down from 3.4350; 1,931.00 Italian lire, down from 1,947.50, and 1.3564 Canadian dollars, down from 1.3573.

Dollar rates in New York as of 4 p.m. EDT, compared to late rates Tuesday, included: 3.03025 West German marks, down from 3.0385; 2.5410 Swiss francs, down from 2.54275; 9.2235 French francs, down from 9.2675, and 1.35685 Canadian dollars, down from 1.3572.

Gold edged up 14 cents in Hong Kong to close at a bid of $311.84 an ounce.

In Europe, gold rose $1.30 in London to a late bid of $310.80 an ounce, and gold gained $2.40 in Zurich to $310.50 an ounce.

On the New York Commodity Exchange, gold bullion for current delivery inched up 10 cents to close at $309.90 an ounce.