Dollar Resumes Its Broad Advance; Gold Declines
The dollar resumed its broad advance Wednesday as it continued to be supported by expectations of renewed economic growth, higher interest rates and only moderate inflation in the United States.
Trading was affected briefly in Europe by a rumor, later denied, that Saudi Arabia’s oil minister, Ahmed Zaki Yamani had been assassinated or had died of an illness. Saudi officials later said Yamani was “alive and well” and on vacation.
The price of gold rose in Hong Kong but fell later in Europe and in the United States. Republic National Bank of New York said bullion was bid at $321 an ounce as of 4 p.m. EDT, down 90 cents from the late bid Tuesday.
The dollar, which had risen to two-month highs Monday and then lost ground to profit taking Tuesday, rebounded Wednesday to levels last seen in early July.
Gary Dorsch, an analyst at the Chicago currency and commodity firm G. H. Miller & Co., said traders anticipate that government reports scheduled for release Friday will disclose substantial increases in retail sales and industrial production during August.
Traders said the acceleration of activity will prevent interest rates from falling. In addition, with pressure from imports holding down prices of commodities and manufactured goods, inflation in the United States should remain under control, Dorsch said.
The combination of relatively high interest rates and low inflation make returns attractive on dollar-denominated investments.
Dorsch also said the dollar received a lift when it rose above 2.95 West German marks, a level viewed as significant by traders who follow charts of exchange rates.
In Europe, the dollar climbed to 2.9570 marks from 2.9420 on Tuesday. Later in the United States, the dollar rose further, to 2.9655 marks from 2.9475 late Tuesday.
The market resisted several attempts to push the dollar lower in Europe, including the rumors of Yamani’s death.
The British pound was hardest hit by the Yamani rumors because of Britain’s reliance on revenue from its North Sea oil holdings.