CURRENCY : Tensions in Persian Gulf Send Dollar Up Slightly

The dollar moved marginally higher against all major currencies except the Canadian dollar in light trading Tuesday, continuing to draw support from tensions in the Persian Gulf.

Gold prices fell. Republic National Bank of New York quoted a bid of $456.75 for an ounce of gold as of 4 p.m. EDT, down from $458.75 late Monday.

Traders said the dollar got a lift from a drop in the British pound. The pound, which has gained against all major currencies, traded Monday at a six-year high against the dollar.

But rumors began flying in earlier overseas markets that “because of the strength of the pound, there was a potential for a cut in British interest rates,” said Robert Ryan, senior trader at Irving Trust Co.

Those rumors “took the pound down like a bullet . . . and the dollar did better because of the weakness of the pound,” he said.

Tensions in the Persian Gulf, where U.S. and Iranian forces clashed Monday, offered some support for the dollar. Iran attacked two neutral ships and more mines were sighted in the gulf Tuesday.

“We’re in a holding pattern with the Middle East tensions,” said Earl Johnson, a trader at Harris Trust & Savings Bank in Chicago.

Trading Quiet in Europe

“If those tensions fade into the background, we might see the dollar slip . . . because the underlying sentiment is still bearish in the wake of the trade numbers,” he said refering to last week’s report of a larger-than-expected February trade deficit.

Trading was uneventful earlier in Europe, where the dollar also edged marginally higher.

Dealers there said a resumption of hostilities in the war-torn gulf region would boost the dollar, but otherwise, worries about the U.S. economy would resume downward pressure on the U.S. currency.

“It may take another one or two weeks, but the dollar will resume its downward trend,” predicted a London-based trader for a Japanese bank.

In Tokyo, the dollar rose to a closing 124.37 Japanese yen from 123.78 yen at Monday’s close. Later, in London, it slipped back to 124.20 yen. In New York, the dollar closed at 124.27 yen, up from 124.23 yen on Monday.

In London, the British pound fell back to $1.8930 from Monday’s six-year high of $1.9015. In New York, it cost $1.8928 to buy one pound, less expensive than Monday’s $1.9050.

Other late dollar rates in New York, compared to late Monday, included: 1.66375 West German marks, up from 1.65975; 1.3760 Swiss francs, up from 1.3735; 5.6590 French francs, up from 5.6370; 1,237.75 Italian lire, up from 1,233.375, and 1.22985 Canadian dollars, down from 1.23205.

Bullion Prices Slip

Late dollar rates in Europe, compared to late Monday: 1.6625 West German marks, up from 1.6615; 1.3752 Swiss francs, up from 1.3745; 5.6465 French francs, up from 5.6410; 1.8642 Dutch guilders, up from 1.8630; 1,235.75 Italian lire, up from 1,234.37, and 1.2337 Canadian dollars, up from 1.2322.

Meanwhile, on the New York Commodity Exchange, gold closed at $458.40 an ounce, down from $459.40 on Monday.

In London, gold fell to a late bid price of $456.50 from $459.25. In Zurich, Switzerland, it dropped to $457 bid from $458.50.

Earlier, in Hong Kong, gold fell to a closing bid of $457.59 from $457.98.

Silver bullion closed at $6.451 an ounce on New York’s Comex, up from Monday’s $6.422. In London, silver fell to a late bid of $6.46 from $6.49.

Tables, Page 9