CURRENCY : Dollar Continues Fall; Gold Gains

The dollar plunged again Monday, piercing key levels as central bank intervention failed to pull it out of the doldrums.

Gold prices rose. Republic National Bank of New York quoted a bid price for gold of $455.10 an ounce as of 4 p.m. EST, up from Friday’s late bid of $452.75 an ounce.

In a wave that swept westward, the dollar fell in Tokyo before closing lower in very light European trading. In New York, the dollar dipped below the 124-yen barrier to finish at its lowest point since early January in active trading.

Dealers said the Federal Reserve entered the market to buy dollars, but the move only served to smooth out the currency’s latest decline, which began last week.

“The Fed was not very useful in what you’d call turning (the dollar) around,” said Ron Sapiro, head trader at Continental Illinois National Bank in Chicago.

But because the dollar’s decline was essentially orderly, “there was no reason for the Fed to come in en masse,” he added.

Traders in Europe were surprised that central banks did not aggressively step in to support the dollar. “It’s gotten away with (the decline) because it’s been so gradual,” said a London trader, who speculated that the central banks would have intervened to stave off a hastier retreat.

Traders said the dollar’s slide was fueled more by investors’ attraction to other major currencies than by any worries about U.S. economic factors. “Everybody’s in love with the yen,” rather than spurning the dollar, Sapiro said.

But the yen is not the only currency on the rise. “All the high-yielding (major) currencies are benefiting” from the market’s recent strength, said James McGroarty, a vice president at Discount Corp.

Bank of Japan Intervenes

Instead of simply selling dollars, traders are jockeying their deals among several currencies. “There has been a lot of cross-playing,” Sapiro said, albeit at the dollar’s expense.

In Tokyo, where the business day ends as Europe’s begins, the dollar fell for a third consecutive trading day, dropping 1.31 yen to a closing 124.43 yen. Later in London, the dollar was quoted lower at 124.20 yen.

In New York, the dollar closed still lower at 123.84 yen, down sharply from 125.30 yen on Friday.

The Bank of Japan intervened shortly after the start of Tokyo trading to prop up the dollar at about 124.40 yen, traders said. One of the central bank’s currency dealers, Taeko Kobayashi, said the bank bought $100 million to $200 million.

The British pound rose in London to $1.8590 from $1.8360. In New York, it cost $1.8705 to buy one pound, more expensive than Friday’s $1.84175.

Other late dollar rates in New York, compared to late Friday, included: 1.65615 West German marks, down from 1.6760; 1.3652 Swiss francs, down from 1.3865; 5.6130 French francs, down from 5.68625; 1.23715 Canadian dollars, down from 1.24205, and 1,226.00 Italian lire, down from 1,238.50.

Other late dollar rates in Europe, compared to late Friday, included: 1.6605 West German marks, down from 1.6760; 1.3705 Swiss francs, down from 1.3865; 5.6275 French francs, down from 5.6860; 1.8685 Dutch guilders, down from 1.8820; 1,231.00 Italian lire, down from 1,241.00, and 1.2377 Canadian dollars, down from 1.2433.

Gold prices jumped higher. On New York’s Commodity Exchange, gold closed at $455.80 an ounce, up from $453.20 on Friday. In London, gold rose to a late bid price of $454 an ounce, compared to late Friday’s $451.70.

In Zurich, gold also moved higher, closing at a bid $453.50, compared to $451.50 late Friday.