CURRENCY : Dollar Stronger on Rumor That U.S. May Let Value Rise

The dollar strengthened in foreign exchange trading Wednesday, especially against the Japanese yen, partly because of a rumor that the Reagan Administration would tolerate a higher value for the U.S. currency.

Gold prices were narrowly mixed. As of 4 p.m. EST, Republic National Bank of New York quoted bullion at $430.25 an ounce, down 20 cents from late Tuesday.

Dealers attributed much of the dollar’s strength to a rumor that an unidentified senior U.S. official had told Japanese reporters that the United States would allow the dollar to move higher following its protracted decline.

Although this story was denied later, many traders scrambled to buy the U.S. currency, causing it to rise in the most active trading of the week against most key currencies except the Canadian dollar.

“It was a bit more energetic today,” said Albert Soria, vice president and foreign exchange manager of Swiss Bank Corp.’s New York branch.

Nevertheless, he said the relatively narrow trading ranges for the dollar, compared to other currencies that have emerged recently, would persist for awhile. “I don’t see any breakout one way or the other,” Soria said.

Many foreign exchange dealers were focusing on the release later this month of U.S. foreign trade figures for January to gain more insight into how to structure their trading strategies.

If those figures provide more evidence of a declining deficit, as shown by statistics of the previous two months, a moderate rally in the dollar would likely result.

If the January deficit widens, dealers probably would sell dollars on the theory that the currency will depreciate further in value to stimulate American exports.

In Tokyo, the dollar closed at 128.47 Japanese yen, up from 128.30 on Tuesday. In London, the dollar traded at 129.27 yen. By the time trading concluded in New York, the dollar was worth 129.40 yen, more than 1 yen higher than 128.32 yen rate quoted late Tuesday.

In London, the pound cost $1.7680, cheaper than $1.7775 late Tuesday. Later in New York, the pound was worth $1.7673, cheaper than $1.7766 late Tuesday.

Other late dollar rates in New York, compared to late Tuesday, included: 1.6969 West German marks, up from 1.6864; 1.4030 Swiss francs, up from 1.3916; 1.2570 Canadian dollars, down from 1.2578; 5.7385 French francs, up from 5.7100, and 1,248.25 Italian lire, up from 1,243.25.

Other late dollar rates in Europe, compared to late Tuesday, included: 1.6945 West German marks, up from 1.6855; 1.4005 Swiss francs, up from 1.3915; 5.7345 French francs, up from 5.7065; 1.9013 Dutch guilders, up from 1.8940; 1,247 Italian lire, up from 1,244.35, and 1.2558 Canadian dollars, down from 1.2570.

Gold bullion rose in London to $429.50 an ounce from $428.70 late Tuesday. It was unchanged in Zurich, Switzerland, at $429.50. In Hong Kong, gold traded at $433.96, compared to $433.80.

On the New York Commodity Exchange, gold bullion for current delivery fell 20 cents to $430.80.

Silver bullion traded late in London at $6.24 an ounce, down from $6.29. On the New York Comex, silver bullion for current delivery traded at $6.21, off about one cent.

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