Dollar Falls to 8-Month Low; Gold Advances

A wave of selling sent the dollar tumbling Monday to its lowest level in nearly eight months against other leading currencies, with the British pound a major beneficiary of the dollar’s sharp retreat.

The pound, helped by high British interest rates, rose to its highest level in more than a year as it led the charge against the dollar. In addition, the dollar dropped below the psychologically important level of 3 West German marks, a technical signal that analysts said contributed to the dollar-selling spree.

“There was awesome selling from all over the place. It just came in torrents,” said Howard Kurz, chief currency trader at Bank of America’s trading center in New York.

As the dollar’s slide steepened, gold reversed early losses. Republic National Bank in New York said gold bullion was bid at $315 an ounce as of 4 p.m. EDT, against $310 in New York last Wednesday. Bullion markets in the United States were closed Thursday and Friday for an extended Independence Day weekend.

As for the dollar, the Federal Reserve Board said its index of the value of the dollar against 10 other leading currencies dropped to 143.50 from 144.45 on Friday, falling to its lowest level since Nov. 15, 1984, and nearly 13% below the all-time high reached in February. The index, which is based on international trade, stood at 100 in the base period of March, 1973.

Selling Pressure

Kurz said selling pressure against the dollar picked up as the U.S. currency fell convincingly below 3 marks.

He said the selling also reflected a growing belief among traders that the Reagan Administration is seeking a lower dollar to help U.S. manufacturers, who have been priced out of some international markets by the dollar’s sharp growth over the past five years.

Ronald Holzer, chief trader at Harris Trust & Savings Bank in Chicago, said there has been a slow shift in investment portfolios out of the dollar and into currencies that provide more attractive returns, especially sterling.

Currently, large three-month bank deposits denominated in pounds offer a return of about 12.375%, against 7.75% on similar dollar-denominated accounts.

The pound rose to $1.3393 in London from $1.3275 on Friday, reaching its highest level since July 2, 1984. Later in New York, the pound rose to $1.3490 from $1.3360.

The pound rose despite the failure of the Organization of Petroleum Exporting Countries to agree on a strategy to halt falling oil prices. Britain is a major oil producer but is not a member of OPEC.

In Tokyo, where trading ends as Europe’s business day begins, the dollar fell to 246.50 Japanese yen from 247.86 yen Friday. Later in London, the dollar was quoted at 246.75 yen, and by the end of the trading day in the United States, the dollar had dropped to 245.975 yen from 246.925 yen late Friday.

Other late dollar rates in Europe, compared to late rates Friday, included: 2.9860 West German marks, down from 3.0100; 2.5232 Swiss francs, down from 2.5255; 9.1650 French francs, down from 9.1775; 3.3945 Dutch guilders, down from 3.4000; 1,921.00 Italian lire, down from 1,925.00, and 1.3587 Canadian dollars, up from 1.3570.

Dollar rates in New York as of 4 p.m. EDT, compared to late rates Friday, included: 2.9760 West German marks, down from 3.0010; 2.4845 Swiss francs, down from 2.5090; 9.05375 French francs, down from 9.1335, and 1.35515 Canadian dollars, down from 1.35705.

Gold began the trading day by falling 97 cents in Hong Kong to close at a bid of $313.64 an ounce.

Gold also fell in Zurich, dropping $2.50 in the Swiss bullion center to a late bid of $309.50 an ounce.

But gold shot higher in late trading in London as the dollar gave ground, winding up at $315 an ounce, against $311.50 on Friday.

On the New York Commodity Exchange, gold bullion for current delivery closed at $315.20 an ounce, up $5.30 from Wednesday.