CURRENCY : Fears of Selloff by Japanese Abate, Giving Dollar a Lift

The dollar surged higher against major foreign currencies Tuesday as traders decided that Japanese investors were unlikely to unload dollars.

Gold prices fell. Republic National Bank of New York said gold was bid at $452.65 an ounce, down from $455.85 late Monday.

The dollar climbed about 1% against the West German mark, British pound and Japanese yen.

The U.S. currency’s strength prompted people who had been betting on a dollar decline to retreat by buying dollars to cover short positions. That contributed to the dollar’s rally.

The dollar had been depressed in March by fears that Japanese trust funds and securities firms would lighten their dollar holdings starting April 1 because they would no longer need to support it for accounting purposes.

When Japanese dollar selling failed to materialize, investors took courage, said Charles A. Spence, vice president of foreign exchange at First Interstate Bank.

In Tokyo, where the business day ends as Europe’s begins, the dollar rose 0.58 yen to close at 124.43 yen, compared to 123.85 on Monday. Later, in London, the dollar was quoted at 125.15 yen. At the end of the trading day in New York, the dollar was quoted at 125.28 yen, up from 124.18 yen late Monday. In London, the British pound fell to $1.8800 from $1.8895 on Good Friday. Later in New York, the pound fell to $1.8790 from $1.8857 late Monday.

Other late dollar rates in New York, compared to Monday’s rates, were: 1.6706 West German marks, up from 1.6540; 1.3769 Swiss francs, up from 1.3639; 1.2418 Canadian dollars, up from 1.2370; 5.6645 French francs, up from 5.6085, and 1,237.75 Italian lire, up from 1,227.25.