CURRENCY : Dollar Gains; Platinum Gives Gold a Boost

The dollar strengthened in foreign exchange trading Tuesday amid a rally on Wall Street and speculation by investors that interest rates were approaching a short-term peak.

Gold prices also rose. Republic National Bank said gold bullion was bid at $454.30 an ounce at 4 p.m. EDT, up from $451 late Friday.

On the New York Commodity Exchange, gold bullion for current delivery was quoted at $455 an ounce, up from $450.80 late Friday.

Gold prices around the world got a boost from big gains in the platinum market. The late bid price in London was $454.80 an ounce, up from late Friday’s $452. In Zurich, Switzerland, gold closed at a bid $455, up from late Monday’s $452.50.

Earlier, gold closed in Hong Kong at a bid of $455.80, up from $454.31.

Traders in the currency markets, returning from a long weekend, said that the dollar was drawing its strength from firm interest rates in the credit markets. Although rumors of an imminent move to tighten credit by the Federal Reserve did not materialize, traders remained encouraged by the U.S. interest rate environment.

“The general sense of the market is that while interest rates are firm, the dollar will put in a better performance,” said James T. McGroarty, a vice president with Discount Corp.

The dollar proved resilient enough to withstand an early move by the West German central bank to sell dollars to keep it in line with other currencies, traders noted. The Bundesbank sold $7.4 million as the dollar moved above the psychologically important level of 1.72 West German marks.

Some investors had been counting on the Fed to push interest rates higher at the end of last week by raising its discount loan rate to member banks. When that didn’t happen after the close of the financial markets Friday, some traders became convinced that interest rates might be peaking. The result was a post-Memorial Day rally in stock prices and the dollar.

Dollar Dips in Tokyo

The moves were unusual, traders said, because they came against a backdrop of rising commodity prices, including gold, and a drop in the yield of long-term government bonds.

The dollar closed in Tokyo at 124.80 Japanese yen, down from Monday’s 124.98 yen. In later London trading it rose to 125.50 yen, and in New York, it was quoted at 125.235 yen, up from 124.925 late Friday.

The dollar also gained against the British pound in London, where it was quoted late Tuesday at $1.8385, compared to $1.8478 in Europe on Monday and $1.8570 in London late Friday. London financial markets also were closed Monday for a national holiday.

Silver bullion traded in London late Tuesday at a bid $6.65 an ounce, up from $6.59 in London late Friday and $6.57 in Zurich on Monday.

On the Comex, silver bullion for current delivery was quoted at $6.600 an ounce, up from $6.530 late Friday.

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