CURRENCY : Dollar Drifts Lower in Sluggish Trading

The dollar drifted lower Thursday against most major currencies except the West German mark and the British pound in a sluggish market weighed down by continued concern about inflation and interest rates.

Gold prices edged higher. Republic National Bank of New York quoted a bid price for gold of $455.70 an ounce at 4 p.m. EDT, up from $455.50 on Wednesday.

Traders said the foreign exchange markets lacked conviction about the dollar’s likely direction in the near term. A rally sparked by Tuesday’s positive government report on U.S. trade performance in March came to a halt Wednesday, and the markets have been casting about for new signals.

“After the trade deficit (report), people are resting on their laurels,” David Godwin, a currency dealer at United Bank of Switzerland’s New York office, said.

The currency markets have caught the inflation anxiety gripping the stock and bond markets, traders said. The Federal Reserve has refrained in recent days from aggressively seeking to push interest rates higher.

Many dealers expected the Fed to drive interest rates higher in an effort to rein in inflation. Fears of renewed inflation were aggravated Tuesday by the March trade figures and a report that U.S. factory use increased in April.

Expect Fed Action

A move by the central bank toward higher interest rates would tend to bolster the dollar.

“Certainly, people are looking for more movement” from the Fed, said Graham Broyd, vice president of foreign exchange at Manufacturers Hanover Trust Co.

In Tokyo, the dollar fell 0.73 Japanese yen to a closing 124.80 yen. Traders described the decline as a correction to the dollar’s earlier rally.

Later in London, the dollar edged up to 124.87 yen. By the end of the trading day in New York, the dollar settled at 124.86 yen, down from 124.93 yen late Wednesday.

In London, the British pound was quoted at $1.8665, more expensive than $1.8605 late Wednesday. Later in New York, the pound retreated to $1.8635 from $1.8675.

Other late dollar rates in New York, compared to late Wednesday’s prices, included: 1.7017 West German marks, up from 1.7007; 1.4177 Swiss francs, down from 1.4182; 5.7540 French francs, down from 5.7575; 1,262.00 Italian lire, down from 1,263.50, and 1.2427 Canadian dollars, down from 1.2463.

Other late dollar rates in Europe, compared to late Wednesday’s rates, included: 1.6990 West German marks, down from 1.7055; 1.4155 Swiss francs, down from 1.4215; 5.7542 French francs, down from 5.7700; 1.9042 Dutch guilders, down from 1.9090; 1,262.00 Italian lire, down from 1,265.50, and 1.2442 Canadian dollars, up from 1.24125.

Gold Prices Advance

Dealers said a rush to buy soybeans by commodity dealers in Chicago helped boost gold prices. Higher prices for the beans following dry weather in the Plains states threaten to cause an increase in food prices and inflation and thus make gold--a favorite hedge against inflation--more desirable.

In London, gold was quoted at a late bid of $456.90 an ounce, up from $453.70 on Wednesday.

In Zurich, Switzerland, the bid for gold was $458, up from $454.

Earlier, in Hong Kong, gold rose $3.02 to close at a bid of $457.56.

On the Commodity Exchange in New York, gold for current delivery settled at $457.40, up from $457.30.

Silver was quoted in London at a bid of $6.72 an ounce, up from Wednesday’s $6.58.

On New York’s Comex, silver for current delivery settled at $6.612, down from $6.685.

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