Dollar Gains; Price of Gold Drops Sharply
The dollar rose today against all key currencies in European trading except the British pound, boosted by improved U.S. economic figures and a cut in Japanese interest rates.
Gold prices fell sharply.
Foreign exchange dealers said the dollar moved higher all week. The currency was propelled further today by the Commerce Department’s report that its index of leading indicators, the government’s main gauge of future economic activity, rose 0.4% in September.
The increase was in line with what many economists had forecast and came after Thursday’s report that the U.S. merchandise trade deficit dipped to $12.6 billion in September, the second straight monthly decline.
“Given the strength of the figures, I wasn’t surprised at all to see such a strong dollar,” said a dealer in Frankfurt, West Germany.
Dealer said the dollar also apparently was aided by Japan’s decision to cut its 3.5% discount rate to 3%, effective Saturday. The discount rate is the interest charged by central banks on loans to commercial banks.
The U.S. Federal Reserve Bank and the White House for some time have been urging Japan to cut its interest rates to help spur its economy, which could increase demand for U.S. products.
In Tokyo, the dollar rose to 161.45 Japanese yen, up from 159.90 yen at Thursday’s close and 161 yen last Friday. Later in London, the dollar firmed to 163.65 yen.
In London, the British pound rose to $1.4065 from $1.3980 late Thursday. Other late dollar rates in Europe, compared to late Thursday’s rates, included: 2.0673 West German marks, up from 2.0455; 1.7160 Swiss francs, up from 1.6930; 6.7375 French francs, up from 6.6750; 2.3365 Dutch guilders, up from 2.3095; 1,428.00 Italian lire, up from 1,413.50, and 1.3903 Canadian dollars, up from 1.3874.
Gold bullion prices fell sharply in Europe on heavy selling by professionals.
In London, gold fell to a late bid of $400.40 an ounce from $405 late Thursday. In Zurich, gold fell to a bid of $400.50 from $406 late Thursday.
Earlier in Hong Kong, gold had risen to a closing bid of $405.47 from $401.82 at Thursday’s close.
Silver bullion fell in London to a late bid of $5.63 an ounce, down from $5.64 late Thursday.