CURRENCY : Dollar Firms Up on Word of Central Banks’ Support

The dollar surged upward Tuesday from its lowest point since early January, responding favorably to reports of modest efforts by central banks to support it.

Gold prices edged higher. Republic National Bank of New York said gold was bid at $455.25 an ounce as of 4 p.m. EST, up from $455.10 late Monday.

There were conflicting reports on the extent of intervention by central banks, although traders agreed that the Bank of Japan bought some dollars with Japanese yen in the Tokyo market.

The Federal Reserve Bank of New York also bought dollars Tuesday, said David H. Arbesman, president of Kemper Currency Inc.

The rally generated by reports of the central banks’ action squeezed out investors who had bet on further declines in the dollar, forcing them to buy dollars to cover borrowed positions, Arbesman said.

Traders who bought dollars were pushing aside the concerns that have sent the dollar lower over the past several weeks. The dollar closed Monday at its lowest levels since the first week in January against major currencies.

The bearish factors include “disenchantment with anything being really done about the budget, the fear of renewed inflation and the fear of another stock market collapse,” Arbesman said.

British Pound Gains

“Those are all really still in the backs of people’s minds, but they’re taking a back seat,” he said.

The dollar showed little reaction to reports that the government’s chief economic forecasting gauge rose 0.9% in February and sales of new homes shot up 20.3%, said David Godwin, chief foreign exchange dealer for the Union Bank of Switzerland in New York.

In London, the pound rose to $1.8705 from $1.8590 on Monday. Later, in New York, the pound fell to $1.8642 from $1.8705.

In Tokyo, where the business day ends as Europe’s begins, the dollar fell 0.06 yen to a closing 124.37 yen. Later, in London, it was quoted at 124.50 yen. In New York, the dollar jumped to 125.26 yen from 123.84 late Monday.

Other dollar rates late Tuesday in New York, compared to late Monday, included: 1.6693 West German marks, up from 1.6562; 1.3768 Swiss francs, up from 1.3652; 1.2360 Canadian dollars, down from 1.2372; 5.6505 French francs, up from 5.6130, and 1,236 Italian lire, up from 1,226.

Bullion Mixed

Other dollar rates late Tuesday in Europe, compared to late Monday, included: 1.6610 West German marks, up from 1.6605; 1.3735 Swiss francs, up from 1.3705; 5.6280 French francs, up from 5.6275; 1.8690 Dutch guilders, up from 1.8685; 1,232.50 Italian lire, up from 1,231.00, and 1.2363 Canadian dollars, down from 1.2377.

On the Commodity Exchange in New York, gold bullion for current delivery was bid at $455.40, down 40 cents from late Monday.

Gold rose in London to a late bid price of $454.75, compared to $454. In Zurich, Switzerland, gold was higher, closing at a bid of $455, compared to $453.50. Earlier, in Hong Kong, gold rose $2.21 to close at a bid of $456.88.

Silver prices rose on the London market, where the metal traded at a bid price of $6.69 an ounce, up from $6.63. On New York’s Comex, silver rose 4 cents to $6.705.