Profit Taking Hurts Dollar; Gold Advances
The dollar fell against most leading currencies in quiet activity on world foreign exchanges Tuesday as traders sold dollars to take profits from the currency’s recent rapid rise.
The price of gold, which dipped in early trading in Hong Kong, reversed course and rose in quiet activity later in Europe and the United States as the dollar gave ground. Republic National Bank of New York said gold bullion was bid at $321.90 an ounce as of 4 p.m. EDT, up $2.40 from Monday.
William Orsini, a foreign exchange analyst at the New York branch of Bank of Montreal, said traders sold dollars Tuesday to cash in on the earlier sharp rise.
In the previous 2 1/2 weeks, the dollar had climbed 5.8% as measured against 10 other currencies by the Federal Reserve Board’s trade-weighted index. The rebound was attributed to fresh expectations of renewed economic growth and higher interest rates in the United States.
Orsini said one reason that traders decided to take profits was apprehension that West Germany’s central bank might intervene in currency markets by selling dollars if the U.S. currency advanced closer to 3 marks, a level viewed as a psychologically important barrier.
Howard Kurz, chief currency trader at Bank of America’s New York trading center, said that there was a feeling that the dollar had climbed too fast. But he also said that underlying demand for the dollar remained strong and that the currency finished the day above its lows.
In Europe, for example, the dollar dipped to 2.9420 marks from 2.9450 marks Monday. Later in New York, however, the dollar nudged up to 2.9475 marks from 2.94675 on Monday.
Meantime, Orsini said traders were anticipating further signs of economic strength in government reports on industrial production, factory use and retail sales, which are scheduled for release in the days ahead.
As the trading day began in Tokyo, the dollar rose to 243 Japanese yen from Monday’s close of 242.95 yen. Later in London, the dollar fell to 242.82 yen. But by the end of the trading day in the United States, the dollar had recovered to 243.075 yen, still below Monday’s bid of 243.55 yen.
Falls Against Pound
In London, the dollar fell against the British pound after four days of strong gains, with sterling rising to $1.3150 from $1.30625 on Monday.
Later in New York, sterling was quoted at $1.3085, against $1.3010 on Monday.
Other dollar rates in Europe, compared to Monday, included: 2.42625 Swiss francs, down from 2.4290; 8.9650 French francs, down from 9.0545; 3.3020 Dutch guilders, down from 3.3040; 1,956.00 Italian lire, down from 1,957.75, and 1.37195 Canadian dollars, up from 1.37105.