Foreign Exchange for Wednesday, Feb. 11, 1987 : Dollar Firms Versus Major Currencies

The dollar strengthened against other major currencies in thin, skittish trading Wednesday, supported by rising U.S. interest rates.

Gold prices eased. Republic National Bank of New York quoted gold bullion at $402 an ounce, down from $402.75 late Tuesday.

The dollar was bolstered by stronger interest rates, notably the key federal funds rate, the interest charged on overnight loans between banks. That rate fell sharply late in the day, however, because of technical factors.

There had been intense speculation in the market that the rise in the fed funds rate was largely due to the U.S. Federal Reserve’s efforts to discreetly push up interest rates through its normal daily operations in the money market.

This is a technique some traders call “snugging up.”

Also, this is seen as a way for the Fed to gently nudge rates upward without having to raise its discount rate, or the interest it charges on loans to member banks.