CURRENCY : Dollar Lower in Reaction to W. German Sale
The dollar finished slightly lower Tuesday in what traders said was a delayed reaction to news that West Germany’s central bank had sold the U.S. currency.
Gold prices also fell. Republic National Bank of New York said gold was bid at $458.75 an ounce as of 4 p.m. EDT, down from $463.25 late Monday.
Traders said investors continued to sell dollars as a follow-through to a report Monday that the Bundesbank had quietly sold at least $2 billion during the last week of May. Such a move lowered its huge dollar reserves and helped slow the dollar’s recent rise.
“There was some spillover activity from that,” said David Godwin, chief foreign exchange dealer at Union Bank of Switzerland’s New York office.
In addition, traders have begun squaring up their positions ahead of the government’s report on U.S. merchandise trade figures for April, due to be released Tuesday.
“Some banks seem to be scaling up their estimates of the trade deficit,” noted Stephen Flanagan, an assistant vice president at Manufacturers Hanover Trust Co. The higher estimates spurred traders to sell dollars and take their profits.
Prediction of $14-Billion
Manufacturers Hanover is forecasting an April deficit of $12.3 billion, higher than earlier rumors that pegged the shortfall at $10 billion, Flanagan said.
One bank was rumored to have predicted that the deficit will be in the $14-billion range, Flanagan said, which further depressed demand for the dollar.
“The market is trying to feel where we will find good support,” he said. “The dollar will be on the softer side for the remainder of the week ahead of the trade numbers.”
The dollar also declined in quiet European dealings.
In Tokyo, where trading ends as Europe’s business day begins, the dollar fell 0.30 Japanese yen to a closing 125.77 yen. In late London trading, it was quoted at 125.80 yen. At the end of trading in New York, the dollar had fallen to 125.52 yen from 125.76.
The British pound strengthened after Monday’s increase of half a percentage point in British interest rates. In London, sterling gained just over a penny to trade at $1.8130, up from $1.8025 late Monday.
In New York, it cost $1.8138 to buy one pound, more expensive than Monday’s $1.8006.
Other late dollar rates in New York, compared to late Monday, included: 1.7113 West German marks, down from 1.7134; 1.4254 Swiss francs, down from 1.4279; 5.7818 French francs, down from 5.8015; 1,271.65 Italian lire, down from 1,273.88, and 1.2283 Canadian dollars, down from 1.2321.
Other late dollar rates in Europe, compared to late Monday, included: 1.7143 West German marks, down from 1.7190; 1.4277 Swiss francs, down from 1.4357; 5.7910 French francs, down from 5.8122; 1.9245 Dutch guilders, down from 1.9303; 1,273.10 Italian lire, down from 1,277.65, and 1.2318 Canadian dollars, down from 1.2324.
Gold finished at $460 an ounce on New York’s Commodity Exchange, down from $463.25 on Monday. In London, the metal was unchanged from late Monday, fetching a late bid of $463.50. In Zurich, Switzerland, gold was lower, closing at a bid of $463.50, down from $464.50.
Earlier in Hong Kong, gold fell 36 cents to close at a bid of $464.03.
Silver on New York’s Comex fell to $7.237 an ounce from $7.270 on Monday. In London, the metal was unchanged from Monday at $7.34.
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