Statement by Germany Sends Dollar Diving

The U.S. dollar plunged in Europe late today after a West German banking official said West Germany’s central bank has not been trying to reverse the dollar’s downward trend.

Gold bullion prices edged lower in thin trading.

For most of the day, the dollar fluctuated within a narrow range, rising marginally against most currencies.

But the U.S. currency turned sharply lower in the afternoon when Claus Koehler, a director of Bundesbank, West Germany’s central bank, said Bundesbank’s recent dollar purchases on the open market were aimed at slowing the dollar’s decline but not at reversing any market trend.

Traders said Koehler’s remarks, carried by the West German VWD economic news service, stunned the market out of the doldrums and sent the dollar tumbling.

News of a 0.4% rise in the U.S. wholesale prices in September was in a line with market expectations and did not move the dollar, a London trader said.

By late afternoon, the dollar was quoted lower against all major European currencies.

Afternoon dollar rates, compared to levels in Europe late Thursday were: 1.9850 West German marks, down from 2.0035; 1.6210 Swiss francs, down from 1.6265; 6.5150 French francs, down from 6.5450; 2.2465 Dutch guilders, down from 2.2575; 1,376.50 Italian lire, down from 1,385.50; and 1.38605 Canadian dollars, down from 1.3866.

The British pound edged up to $1.4285 from $1.4250.

Tokyo markets were closed for a public holiday. The dollar was quoted in London at 154.35 Japanese yen, marginally up from 154.23 yen in Tokyo late Thursday.

Meanwhile, gold bullion traded below $430 an ounce for most of the European day, but jumped back over the barrier in response to the dollar’s late decline. However, it remained below levels of late Thursday.

By late afternoon, gold was quoted in London at a bid of $431 an ounce, down from $432 late Thursday.

In Zurich, the metal traded at a bid of $431.25 late in the afternoon, down from $434.50 late Thursday.

Earlier, in Hong Kong, gold fell $8.30 to close at a bid of $426.33, down from Thursday’s $434.63.

Silver was quoted in London at a late bid of $5.66 an ounce, down from $5.69 late Thursday.