Dollar Falls Sharply, Retreats 3.2% in Week

The dollar fell sharply Friday, extending a retreat that has seen it lose 3.2% of its value in a week, following further evidence of sluggish economic activity in the United States.

“There’s only been one direction and it is down,” said Joseph Cammarata, assistant chief currency dealer at the New York office of Barclays Bank.

The price of gold rose as the dollar fell. Republic National Bank of New York said gold bullion was bid at $317.75 a troy ounce Friday afternoon, up $3.75 from the late bid Thursday.

Economy ‘Becalmed’

Currency dealers said a Commerce Department report Friday that retail sales in the United States fell 0.8% in June was viewed as confirmation that the economy is becalmed.

Ronald Holzer, chief trader at Harris Trust & Savings Bank in Chicago, said until this week, the dollar had been holding above 3.0 West German marks in hopes of support for a pickup in economic activity in the United States.

But with no immediate signs of improved growth, “the dollar is having trouble finding support at this time,” Holzer said. “Sellers are rampant in the market.”

On Friday, the dollar dropped below 2.90 marks, reaching levels last seen more than 10 months ago.

Fed Index

The Federal Reserve Board said its index of the value of the dollar against 10 other currencies fell to 139.87 on Friday, off 3.2% from the end of the previous week and the lowest level since Aug. 24, 1984. The index, which is adjusted for trade, stood at 100 in the base period of March, 1973, and has fallen 15.1% since reaching a record 164.72 on Feb. 25.

Holzer also said inflation fears are hurting the dollar, despite a Labor Department report Friday that wholesale prices in the United States held steady in June.

He said rapid growth of the money supply has made it difficult for the Federal Reserve to push interest rates lower in the United States without reviving higher levels of inflation. On the other hand, he said, economic weakness will keep the Fed from adopting a restrictive policy that would push interest rates higher to combat inflationary pressures.

Tokyo Trading

In Tokyo, the dollar began the trading day by falling to 242.80 Japanese yen from 242.95 yen Thursday and 247.86 yen at the end of the previous week. Later in London, the dollar was quoted at 241.03 yen, and by the end of the trading day in the United States, the dollar had fallen to 240.00 yen from 243.10 late Thursday.

The British pound rose to $1.3892 in London from $1.3820 late Thursday and $1.3275 last Friday. Later in New York, the pound climbed to $1.39075 from 1.3745 late Thursday.