Dollar Resumes Broad Decline; Gold Is Mixed

The dollar continued a broad decline Tuesday, dropping to levels last seen in 1984 but wound up above its lows of the day as some traders bought dollars late in the session to take profits from its earlier steep slide.

Gold turned in a mixed performance, rising in Hong Kong and Europe but falling later in the United States as the dollar stabilized. Republic National Bank of New York said gold bullion was bid at $313.50 an ounce as of 4 p.m. EDT, down $1.50 from the late bid Monday.

An example of the dollar’s activity was its performance against the French franc.

In Paris, the dollar fell to 9.0350 francs from 9.1650 francs Monday, its lowest level since Nov. 8, 1984. Later, the dollar briefly slipped below 9 francs before recovering slightly to 9.0125 francs in New York against 9.05375 late Monday.

Currency dealers said the dollar’s recovery of some of its lost ground in late trading reflected short-covering.

Short-Covering

In a short sale, a trader sells borrowed dollars, betting on a decline that will enable him or her to buy back dollars later at a lower exchange rate and realize a profit.

The overall drop in the dollar was attributed to a growing perception that “the economy is not in that good shape” in the United States, said Jeffrey Brummette, a corporate currency trader at Irving Trust Co., a New York bank.

He said that not all traders are convinced that the dollar has reached a major turning point, but he said that dollar selling could take off if economic reports continue to confirm that the economy is weakening.

Foreign exchange dealers in Europe also said pessimism about the strength of the U.S. economic recovery was spreading.

Selling Sentiment

Contributing to the selling sentiment was the dollar’s drop Monday below 3 West German marks, a level viewed as a key barrier.

The Japanese yen also rolled up big gains.

In Tokyo, the dollar fell to 246.05 yen from 246.50 yen Monday. Later in London, the dollar dropped to 245.05 yen, and by the end of the trading day in the United States, it had dropped to 244.45 yen from 245.975 yen late Monday.

The British pound, underpinned by relatively high interest rates, was one of the principal beneficiaries of the dollar’s weakness and has climbed to levels last seen more than a year ago.

At one point Tuesday, British banks were quoting $1.37 for the pound, which later settled in London to $1.36675, against $1.3393 Monday.

Late Dollar Rates

Later in New York, sterling was quoted at $1.36525, against $1.3490 late Monday.

Other late dollar rates in Europe, compared to late rates Monday, included: 2.9560 West German marks, down from 2.9860; 2.4745 Swiss francs, down from 2.5232; 3.3320 Dutch guilders, down from 3.3945; 1,889.50 Italian lire, down from 1,921.00, and 1.3536 Canadian dollars, down from 1.3587.

Dollar rates in New York as of 4 p.m. EDT, compared to late rates Monday, included: 2.9660 West German marks, down from 2.9760; 2.4820 Swiss francs, down from 2.4845, and 1.35415 Canadian dollars, down from 1.35515.