Dollar Rises in Hectic Trading; Gold Is Mixed

The dollar rose against most major foreign currencies in hectic trading today, while the British pound continued to fall on the prospect of an oil price war.

Gold prices were lower in Europe and rose slightly in Asia.

Currency dealers in Europe said the dollar rose on the strength of buying by commercial interests needing to balance their books at the end of the year. Traders said that as the dollar reached 2.5590 West German marks, the Deutsche Bundesbank--that nation’s central bank--sold an undisclosed amount of dollars.

However, the dollar still closed at 2.5450 marks, higher than Tuesday’s 2.5400 marks.

The pound slid to $1.4112, down from $1.4355 Tuesday.

The fall of sterling was a result of the Organization of Petroleum Exporting Countries’ decision Monday to defend its world oil market share against non-OPEC producers such as Britain. Analysts have said such a decision could lead to a global price war, and oil prices plunged Monday and Tuesday on U.S. commodity markets before rallying early today.

Lower oil prices reduce Britain oil tax revenues and foreign exchange earnings, and European currency dealers said market attention was focusing on hour-to-hour swings in spot oil prices.

Currency dealers said the Bank of England intervened slightly to smooth the pound’s decline. But they speculated that the British central bank might intervene heavily in coming days to support the pound.

“I still don’t think there’s an awful lot of confidence in sterling at the moment,” said a London dealer.

In Tokyo, the dollar began the trading day by closing at 203.70 Japanese yen, up from 203.45 yen Tuesday. Later, in London, the dollar was quoted at 204.80 yen.