Foreign Exchange for Monday, Oct. 20, 1986 : Dollar Up Broadly; Gold Advances

The dollar rose broadly Monday after West Germany’s central banker publicly declared it had fallen far enough, suggesting to many traders that the bank would intervene to support the currency. Gold prices also rose in trading dominated largely by professionals. Republic National Bank in New York quoted gold at a bid price of $426 an ounce, compared to $419 on Friday.

Traders said remarks in London by Karl Otto Poehl, president of West Germany’s central Bundesbank, were a significant but temporary influence pushing the dollar higher. Poehl asserted that a further decline in the dollar’s value might imperil world economic growth.

Many traders reacted by withholding sales of dollars or buying them in anticipation that the Bundesbank would buy the U.S. currency to stall its downward trend.

The Bundesbank has been buying dollars in recent weeks to prop the currency up near the 2-mark level. The dollar dipped below 2 marks for the first time this decade in September.