CURRENCY : Rumors of Accord Help Boost Dollar

The dollar continued its ascent against most major currencies Wednesday on rumors of more dollar buying by the Bank of Japan and a possible multinational accord to support the U.S. currency.

Gold and silver prices fell in reaction to the dollar’s strength. Republic National Bank of New York said gold was bid at $448.25 an ounce as of 4 p.m. EDT, down from $452.65 late Tuesday.

A news report out of Japan, quoting anonymous sources, said finance ministers and central bankers of the Group of Seven countries are likely to agree that the dollar should be held above 125 yen.

Traders gave credence to the rumor of the dollar-yen target when they saw evidence that the Federal Reserve was buying Treasury securities for a customer, which they guessed might be the Bank of Japan, said Arthur Liming, an analyst at LNS Financial Group in Chicago.

The dollar also has been helped somewhat by a high federal funds rate, the rate banks charge each other for overnight loans. The higher rate makes dollar-denominated securities more attractive.

Liming said the dollar eased off from its highs of the day when traders observed that the Federal Reserve was injecting reserves into the financial system, something that would tend to restrain interest rates.

Dealers said the dollar also was boosted when a feared Japanese selloff of dollars at the beginning of the new quarter failed to materialize.

But they said trading was likely to remain limited before next week’s meeting in Washington of officials of the Group of Seven--the United States, Japan, Britain, France, West Germany, Canada and Italy--and the April 14 release of U.S. trade figures for February.

Gold Lower

In London, the dollar rose against the British pound. The pound fell to $1.8790 from $1.8800 late Tuesday. Later in New York, the pound fell to $1.8716 from $1.8790 late Tuesday.

In Tokyo, the dollar rose to a closing 125.03 Japanese yen from 124.43 yen at Tuesday’s close. Later, in London, it edged back to 124.98 yen. At the end of the trading day in New York, the dollar rose to 126.03 yen from 125.28 yen late Tuesday.

Other late dollar rates in New York, compared to late Tuesday’s rates, included: 1.6790 West German marks, up from 1.6706; 1.3893 Swiss francs, up from 1.3769; 1.2416 Canadian dollars, down from 1.2418; 5.6925 French francs, up from 5.6645, and 1,243.12 Italian lire, up from 1,237.75.

Other late dollar rates in Europe, compared to late Tuesday’s rates, included: 1.6700 West German marks, up from 1.6690; 1.3775 Swiss francs, up from 1.3765; 5.6570 French francs, down from 5.6605; 1.8720 Dutch guilders, up from 1.8700; 1,236.50 Italian lire, up from 1,237.75.