CURRENCY : Dollar Slips in Slow Trading; Gold Dips
The dollar declined against most key currencies in quiet trading Tuesday after major U.S. banks announced a cut in their prime lending rates.
Gold prices were slightly lower after rising overseas. At Republic National Bank of New York, gold bullion was quoted at $454.50 an late Tuesday, down 25 cents from late Monday.
James O’Neill, an economist at Marine Midland Bank, said currency markets were concerned that Tuesday’s cut in banks’ prime rates, to 8.5% from 8.75%, could prompt the Federal Reserve to further ease its credit policies. Lower interest rates tend to push down the dollar’s value.
Traders said the dollar also was depressed by the release of more bad news about the economy.
The Commerce Department said its chief economic barometer, the index of leading indicators, declined in December for the third straight month, a typical harbinger of recession.
In addition, the government reported sales of new homes declined for the second consecutive month in December, closing out a year in which home sales fell 10.1% from 1986.
In Tokyo, where global trading begins, the dollar closed at 128.90 Japanese yen, down from 129.00 on Monday. The dollar traded lower in London at 128.55 yen. Later, in New York, the dollar stood at 128.35 yen, down from 129.375 yen.
In London, one British pound cost $1.7620 late Tuesday, up from $1.7580 late Monday. Sterling fetched $1.7690 in New York, up from $1.7575.
Other late dollar rates in New York, compared to late Monday, were: 1.6822 West German marks, down from 1.6920; 1.3735 Swiss francs, down from 1.3820; 1.27495 Canadian dollars, up from 1.27435; 5.6770 French francs, down from 5.7035, and 1,239.075 Italian lire, down from 1,244.25.
Late rates in Europe, compared to Monday, included: 1.6780 West German marks, down from 1.6945; 1.3780 Swiss francs, down from 1.3813; 5.6955 French francs, down from 5.7040; 1.8945 Dutch guilders, down from 1.9000; 1,242.375 Italian lire, down from 1,245.125, and 1.2753 Canadian dollars, down from 1.2765.
At the New York Commodity Exchange, gold bullion for current delivery was quoted at $453.90 an ounce, down from $454.10 late Monday.
Gold closed in London at a bid price of $456.50, up from $453, and in Zurich, Switzerland, at $456.50 bid, up from $451.50.
Earlier in Hong Kong, gold closed at a bid $459.10, up from $456.66.
On the New York Comex, silver bullion for current delivery fell to $6.517 an ounce from $6.570. Silver bullion traded late in London at a bid $6.63, up from $6.55.
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