Efforts to Stem Decline Fizzle : Dollar Continues to Plunge in Bearish Market

The dollar continued to plunge in nervous, active trading Wednesday, declining to a two-month low against the Japanese yen and resisting any efforts for a possible rebound.

Gold prices also retreated. Republic National Bank of New York at 4 p.m. EDT quoted gold bullion at $458 an ounce, down $1 from late Tuesday.

Traders said the market has been bearish on the dollar ever since Friday’s U.S. trade deficit report, which showed a widening shortfall of $15.7 billion in June, and there was nothing Wednesday to change that sentiment.

A sharp decline in the dollar on Tuesday helped pull down the stock and bond markets.

“There’s nothing going on. But the market just seems to be saying, ‘Gee, the dollar is going to go lower,’ ” said Robert Ryan, senior trader at Irving Trust Co.

Efforts to push the dollar higher fizzled Wednesday, dealers said.

James Vick, a vice president and senior trader at Manufacturers Hanover Trust Co., said the dollar had been artificially boosted by the tensions in the Persian Gulf in recent weeks, and the trade deficit report was just an excuse to bring it down.

“The trade figures just brought the economic figures for the dollar back into focus. The fundamentals were still negative,” he said.

Traders said the Bank of Japan intervened in the Tokyo market to support the dollar for the first time since late April, as the U.S. currency fell to its lowest level in almost two months there.

The dollar closed at 145.35 Japanese yen in Tokyo, its lowest level since June 22 and down sharply from 148.55 yen late Tuesday. It also was quoted at 145.35 yen in London. Later, in New York, the dollar stood at 144.26 yen, down from 146.30 and the lowest level since mid-June.

“In basically four days we have reversed the rise of the dollar, which took five weeks to accomplish,” Vick said. Against the yen, in particular, the dollar has fallen about 5% from a high of about 152.25 yen in July, he said.

In London, it cost $1.6140 to buy one British pound, cheaper than $1.6170 late Tuesday. Sterling fetched $1.6220 in New York, up from $1.6150.

Other late dollar rates in New York, compared to late rates Tuesday, were: 1.8332 West German marks, down from 1.8443; 1.5209 Swiss francs, down from 1.5305; 1.3304 Canadian dollars, down from 1.33165; 6.1215 French francs, down from 6.1575, and 1,327.50 Italian lire, down from 1,333.75.

On the New York Commodity Exchange, gold bullion contracts for current delivery fell 30 cents an ounce to $458.30.