Trade Deficit Pushes Dollar Broadly Lower : Worse-Than-Expected Figures Cited; Gold Rises to 4-Year High

The dollar fell sharply against nearly all major currencies in active European trading today, depressed by worse-than-expected U.S. trade deficit figures.

Gold prices reached the highest level in four years.

The precious metal, which had risen $14 an ounce in the previous two sessions, continued its strong advance, which traders linked to the dollar’s weakness and growing fears of impending inflation.

In London, gold was quoted at a late bid price of $441.50 an ounce, up from $436.50 on Monday. It was the metal’s best showing in London since May 18, 1983, when it reached $442.75.

In Zurich, gold closed up $6 at $442.50, its highest level since May 19, 1983, when it reached $443.

Earlier in Hong Kong, gold rose $5.50 to close at a bid 439.39.

The dollar, meanwhile, was hurt by Commerce Department figures that showed the American monthly trade deficit swelled to $15.1 billion in February, an indication that Washington’s cheap-dollar therapy isn’t stemming a growing flood of imports.

Traders said the dollar received some support from heavy, concerted central bank intervention, but one London foreign exchange dealer said the trade balance figures were seen as “just another reason to sell the dollar.”

In Tokyo the dollar fell to a record low against the Japanese yen as major Japanese financial institutions dumped U.S. government bonds and bought yen to pour into the Tokyo stock market, which hit a record high.

In Tokyo, the dollar fell 1.15 yen to 141.35, its lowest closing level there since modern exchange rates were set in the late 1940s. The previous record-low close of 142.50 yen was hit on Friday and Monday.

The already weak dollar got caught in a vicious circle today, dealers said.

As it kept testing its lower levels this morning, Japanese institutions, the biggest holders of U.S. government debt, got tired of facing exchange rate losses on these dollar-denominated bonds.

Later in London, the dollar was quoted down at 140.85 yen.

Other late dollar rates today, compared to Monday included: 1.7910 West German marks, down from 1.8085; 1.4855 Swiss francs, down from 1.4976; 5.9825 French francs, down from 6.0165; 2.0320 Dutch guilders, down from 2.0400; 1,282.50 Italian lire, down from 1,289.50, and 1.3180 Canadian dollars, up from 1.3020.

In London, the British pound was quoted at $1.6290, more expensive for buyers than $1.6250 late Monday.