Dollar Gains in Limited Trading; Gold Advances
The dollar rose against other major currencies Monday in worldwide foreign exchange trading that was limited due to bank holidays in Britain, Hong Kong and Singapore.
Gold prices edged higher. Republic National Bank in New York quoted gold as of 4 p.m. EDT at $335.65 an ounce, up 40 cents from Friday’s late bid.
Currency dealers said the dollar’s upswing came in trendless activity, which they said reflected the thin trading and an absence of further reports on the condition of the U.S. economy.
Recent government indicators concerning the level of U.S. business activity have been mixed, raising doubts as to how much the economy will accelerate in the late stages of 1985.
Those doubts, together with traders’ concern about the large U.S. budget and trade deficits, have put downward pressure on the dollar in recent weeks. The financial markets are now awaiting additional data that might help them form a consensus about the economy’s outlook.
In the meantime, American interest rates, which determine the yields available on dollar-denominated investments, edged higher in the credit markets Monday. For example, the federal funds rate--that charge on overnight loans between banks--climbed to 7.875% from 7.5% late Friday.
Traders said short covering by some dealers also helped give the dollar a modest boost. Short covering is when dealers buy dollars they previously borrowed and then sold in the hope the currency’s value would fall.
The dollar began its trading today in Tokyo by inching down to 236.40 Japanese yen from 236.45 yen late Friday. In Frankfurt, the dollar was quoted at 236.40 yen, and, in U.S. trading, the dollar climbed to 236.75 yen from 236.53.
Also in Frankfurt, the British pound climbed to $1.4035 from $1.4010 on Friday. But, in U.S. dealings, sterling dropped to $1.4005 from $1.4045. The pound received support late last week from the Soviet Union’s announcement of an increase in crude oil prices. Britain also is a major oil producer.
Other dollar rates in Europe, compared to late Friday, were: 2.7577 West German marks, up from 2.7500; 2.2553 Swiss francs, up from 2.2512; 8.4220 French francs, up from 8.3950; 3.1030 Dutch guilders, up from 3.0950; 1,850.75 Italian lire, up from 1,849.00, and 1.3564 Canadian dollars, up from 1.3537.
Other dollar rates in the United States as of 4 p.m. EDT and compared to Friday were: 2.7676 West German marks, up from 2.7505; 2.2645 Swiss francs, up from 2.2515; 8.46125 French francs, up from 8.4200, and 1.35795 Canadian dollars, up from 1.3554.
In bullion trading, gold rose in Zurich to $337.00 an ounce from $334.60 late Friday. Precious metals markets in London and Hong Kong also were closed for the bank holidays.
On the Commodity Exchange in New York, gold for current delivery inched up 20 cents to $335.90 an ounce. Also on the Comex, silver for August delivery gained 8.1 cents to $6.316 an ounce.
