Currency : Dollar Mixed in Nervous Trading

The dollar was little changed in nervous trading Monday, but analysts predicted that problems thrown off by the stock market collapse will eventually push the currency sharply lower.

Gold prices, meanwhile, were up around $3 an ounce on late buying.

Early dollar declines were kept in check by fears of central bank intervention to steady the currency, but analysts said that this would be a temporary respite.

Currencies were spared the frenzy that hit securities markets during the past two weeks, but the dollar opened sharply lower in European trading Monday, suggesting that the storm that continued to ravage stocks would spread to the foreign exchanges this week.

“At the moment, I believe nothing can prevent the dollar from falling further,” said Chris Zwermann, currency analyst at Swiss Bank Corp.’s Frankfurt operation.

The dollar closed at 1.7785 West German marks, up slightly from 1.7780 marks at Friday’s close and above the day’s low of 1.7655 marks hit in European trading.

Gain Against Yen

“I think there are strong possibilities that we’ll make new lows; there are big sellers on any bounce,” said one trader.

London traders said the Bank of England supported the dollar, buying the U.S. currency with pounds when the British currency hit $1.6970, well above its close Friday of $1.6855. It later closed here at $1.6850.

The dollar was stronger against the Japanese yen, rising to 142.35 from 141.75 yen Friday.

Since the leading industrial democracies struck the Louvre agreement in February to foster currency stability, currency markets have been fairly calm except for occasional bouts of volatility.

But the stock market collapse and the measures meant to restore confidence are creating their own pressures, which are likely to push the dollar lower.

To help forestall any liquidity crisis, the Federal Reserve has pumped funds into the U.S. banking system, pushing down interest rates in leaps and bounds.