CURRENCY : Dollar Mixed; Gold Gains
The dollar closed mixed against major foreign currencies Friday amid speculation that interest rates would soon rise.
In Europe, the dollar fell, but central bank intervention tempered its slide, dealers said.
Gold prices increased. Republic National Bank of New York quoted a bid of $455.25 for an ounce of gold as of 4 p.m. EDT, up from $452.65 late Thursday.
The government’s announcement of a 0.6% increase in wholesale prices for March was viewed as mildly bullish and had a stabilizing influence on the dollar, said Dan Holland, a trader at Discount Corp.
Traders believe that the Federal Reserve might be moved to tighten credit--thereby raising interest rates--to counter a surge in inflation.
Higher interest rates would have a calming effect on the dollar, which fell sharply on Thursday after the government released disappointing balance of trade figures.
Another government report Friday, of a 0.1% rise in industrial production, produced market speculation that companies were buying foreign machinery to increase their output, Holland said. Traders believe that higher output would lead to increased exports, and eventually a shrinkage in the nation’s trade deficit.
The Commerce Department said Thursday that the trade deficit widened to $13.8 billion in February. Financial markets had expected the gap to narrow.
Holland described trading Friday as quiet.
While American markets interpreted Friday’s economic figures as positive for the dollar, overseas traders saw them in a negative light and sold dollars. The wholesale price figure was larger than expected and the industrial output number was lower than anticipated.
In Tokyo, where trading ended before the figures were released, the dollar fell 2.02 Japanese yen to a closing 124.13. Later, in London, it was quoted at 123.90 yen and in New York, it rose to 123.80 yen from 123.725 yen late Thursday.
In London, it cost $1.8890 to buy one pound, higher than $1.8755 on Thursday. In later New York trading, sterling rose to $1.9003 from $1.8739.
Other late dollar rates in New York, compared to late Thursday’s prices, included: 1.66095 West German marks, down from 1.66275; 1.3725 Swiss francs, up from 1.3720; 5.6345 French francs, up from 5.6325; 1,232.625 Italian lire, down from 1,233.00, and 1.2333 Canadian dollars, down from 1.2365.
Late dollar rates in Europe, compared to late Thursday, included: 1.6605 West German marks, down from 1.6635; 1.3720 Swiss francs, down from 1.3745; 5.6325 French francs, down from 5.6390; 1.8630 Dutch guilders, down from 1.8680; 1,232.50 Italian lire, down from 1,244.00, and 1.2335 Canadian dollars, down from 1.2368.
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