CURRENCY : Dollar Edges Higher in Seesaw Trading

The dollar gyrated in world trading Thursday but managed to finish mostly higher on key markets, maintaining its recent gains amid profit taking and rumors of central bank action to keep the currency in line.

Still, traders acknowledged that despite the recent rally, nothing fundamentally has changed to ensure a continued increase in the dollar’s value.

Gold prices eased. Republic National Bank of New York quoted a bid of $447.90 for an ounce of gold as of 4 p.m. EDT, down from $448.80 late Wednesday.

The dollar opened higher when the day’s trading began in Asia, but analysts said the Bank of Japan quickly began calling traders in an attempt to dampen their enthusiasm for the U.S. currency. The dollar quickly retreated when traders learned the Bank of Japan was unhappy with the currency’s level and was monitoring the situation.

When trading shifted to Europe, however, the dollar resumed its upward momentum in an unusually volatile session.

Dealers in London said there was no apparent reason for the rise, although most concurred that positive sentiment following this week’s economic summit in Toronto and a positive U.S. trade report for April helped support the currency.

Traders in New York downplayed indications that the major industrialized democracies would tolerate a higher dollar.

Lacks Momentum

“What is a slightly higher dollar?” Ted Wolicki, a trader at Continental Illinois Bank & Trust Co. in Chicago asked rhetorically.

“If the dollar is nudged up, it will have to be slow and gradual. It’s come up a bit too quickly over the past few trading days,” he noted.

James McGroarty, vice president at Discount Corp., said the dollar did not have enough momentum to test the psychologically important levels of 130 Japanese yen and 1.80 West German marks.

“Generally in North America there was a lack of appetite to drive the dollar sharply higher,” he said. “To push it higher, we needed fundamental news, and we didn’t have any.”

While the dollar was off for most of the domestic trading session, a late wave of buying by Australian and New Zealand investors helped the currency finish mostly higher, said Robert Ryan, senior trader at Irving Trust Co.

Analysts said that while the dollar may be headed higher in the long term, it is unlikely to test key levels on the upside until the release of the next set of U.S. trade figures, which could serve as a springboard for a further advance.

In Tokyo, where trading ends before the European day begins, the dollar rose 0.95 yen to close at 128.55, up from Wednesday’s 127.60. Later in London, it was quoted at 128.70. In New York, the dollar closed at 128.62 yen, off slightly from 128.95 on Wednesday.

The dollar gained against the British pound. In London, the pound fetched $1.7565, down from $1.7710 late Wednesday. In New York, it cost $1.7552 to buy one pound, cheaper than Wednesday’s $1.7658.

Gold Declines

Other late dollar rates in New York, compared to late Wednesday, included: 1.7850 West German marks, up from 1.7818; 1.4763 Swiss francs, up from 1.4747; 6.0050 French francs, up from 6.0025; 1,323.88 Italian lire, up from 1,3202.75, and 1.2022 Canadian dollars, down from 1.2102.

Other late dollar rates in Europe, compared to late Wednesday, included: 1.7855 West German marks, up from 1.7740; 1.4800 Swiss francs, up from 1.4720; 6.0245 French francs, up from 5.9747; 2.0145 Dutch guilders, up from 1.9975; 1,326.50 Italian lire, up from 1,314.50, and 1.2030 Canadian dollars, down from 1.2100.

On the New York Commodity Exchange, gold finished at $447.70 an ounce, down from $449.50.

In London, gold rose to a late bid of $448.75 from $448.50. Gold finished at $448.50 in Zurich, Switzerland, unchanged. Earlier in Hong Kong, gold fell $1.68 to close at $449.78.

Silver eased on New York’s Comex to $6.967 an ounce from $7.177 on Wednesday. In London, the metal was trading at a late bid of $7.02, compared to $7.06.

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