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Dollar Soars to 2-Month High in Busy Trading

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Associated Press

The dollar soared to a two-month high in sometimes hectic trading Friday in a buying spree touched off by expectations of sharper economic growth and higher interest rates in the United States.

The surge pushed the dollar up by more than four cents against the British pound, by more than 7 pfennigs against the West German mark and by more than 45 Italian lire in busy European trading. There are 100 pfennigs to a mark.

But activity slowed down later in the United States, and the dollar ended the day below its highs against most currencies as traders sold dollars to cash in on the sharp gains and to reduce their exposure to changes in sentiment that might occur over the weekend.

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Even with the late bout of profit taking, “it looks like you have seen the low for the dollar,” said David Arbesman, a first vice president at Prudential-Bache Securities in New York.

Gold Rebounds

The price of gold fell initially in reaction to the dollar’s rise, then recovered in late trading to post slight gains in the United States. Republic National Bank of New York said gold bullion was bid at $321 an ounce as of 4 p.m. EDT, up 50 cents from the late bid Thursday but down $12 from the end of the previous week.

The Federal Reserve Board’s trade-weighted index of the dollar against 10 other currencies jumped 1.06% from Thursday to bring its rise for the week to 3.06%. That left the index at its highest level since July 9.

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The dollar’s sharp gains were attributed to reports Thursday by U.S. auto makers of record sales of new cars in late August and a Labor Department report Friday of an unexpectedly large decline in the U.S. unemployment rate.

Jack Barbanel, a first vice president at Gruntal & Co. in New York, said that European currency traders have been nervously watching the economic indicators and believe that “if the economy improves, the Federal Reserve will take steps to push up interest rates.”

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