Dollar Rallies Versus Most Currencies

The dollar rallied against most major currencies Tuesday, after two major American banks announced hikes in their prime lending rates.

Gold prices fell. At Republic National Bank, it sold for $417.90 an ounce, down from $421 late Monday.

Citibank, the nation’s largest bank, said it was raising its prime rate to 7.75% from 7.5% late in the afternoon. Chase Manhattan Bank followed with a similar announcement soon afterward.

After having fallen to its third consecutive record low of 145.85 Japanese yen, the dollar jumped back to 146.45 yen soon after the announcement.

“It’s getting a little bit of a pop because of the prime rate,” said Don Holland, assistant vice president for Discount Corp.

Holland said traders were apparently viewing the prime rate hike as a positive sign for the U.S. economy.

“With the economy doing better and rates moving up a bit to attract more capital, you could see the dollar stabilize,” the currency analyst said.