CURRENCY : Dollar Rises Sharply Against Yen; Gold Falls
The dollar rose sharply against the Japanese yen Tuesday but was restrained against European currencies by the dollar sales of central banks.
Gold prices fell to their lowest levels since early March as inflation fears receded. Republic National Bank of New York quoted a late bid of $437.20 an ounce, down from $442.60 Monday.
By the end of the trading day in New York, the dollar was lower against the British pound and French franc, slightly higher against some other European currencies and sharply higher against the yen.
The dollar was knocked down in Europe through concerted dollar-selling by the central banks of West Germany, Switzerland, Belgium, France and other nations, but it bounced back as soon as the central banks dropped out of the market.
Traders used the brief drop as a buying opportunity, and the dollar rose in trading that turned into “a bit of a panic,” said James Hohorst, managing director of foreign exchange for Manufacturers Hanover Trust Co.
The Federal Reserve later dampened the rally somewhat by selling dollars for a second consecutive day, but demand remained strong, traders said.
Slowing the Pace
“When the Fed came in, the market said, ‘How many do you want to sell? We’ll take them,’ ” said David H. Arbesman, president of Kemper Currency Inc.
Central banks, which generally refuse to comment on intervention, were unusually open about Tuesday’s move. The Swiss, Belgian and French central banks all confirmed their participation.
“We wanted to slow the pace of the developments in the market and give the market a certain breathing space to think about where the dollar should be going,” said a spokesman for the Swiss National Bank.
The rise was sharpest against the yen because the Bank of Japan showed no signs of intervening against the dollar, traders said.
In Tokyo, where trading ends before Europe’s business day begins, the dollar fell 0.75 yen to close at 130.95. Later, in London, it was quoted at 130.80 yen. At the end of trading in New York, the dollar rose to 132.74 yen from 131.14 late Monday.
The pound recovered despite the Bank of England’s decision to trigger a rise in the British commercial banks’ base lending rate that was smaller than expected.
In London, the pound rose to $1.7200 from $1.7030 late Monday. Later, in New York, the pound rose to $1.7085 from $1.7025 late Monday.
Other late dollar rates in New York, compared to late Monday’s rates, included: 1.8220 West German marks, up from 1.8216; 1.5080 Swiss francs, up from 1.5078; 1.2097 Canadian dollars, up from 1.2063; 6.1340 French francs, down from 6.1483, and 1,352.50 Italian lire, up from 1,351.00.
Silver Rises
Other late dollar rates in Europe, compared to late Monday’s rates, included: 1.8070 West German marks, down from 1.8185; 1.4960 Swiss francs, down from 1.5050; 6.0885 French francs, down from 6.1385; 2.0210 Dutch guilders, down from 2.0460; 1,337.00 Italian lire, down from 1,353.48, and 1.2105 Canadian dollars, up from 1.2075.
In Hong Kong, gold rose $2.16 an ounce to close at a bid $446.30. The metal rose in London to a late bid of $443.20, compared to late Monday’s $441.50. In Zurich, Switzerland, gold closed at a bid of $443.20, compared to $443 late Monday.
On the Commodity Exchange in New York, gold bullion for current delivery fell to $437.50 an ounce, down from $443 late Monday.
Silver bullion prices rose on the London market. Silver traded at a late bid price of $6.92 an ounce, compared to Monday’s $6.84. On New York’s Comex, silver bullion for current delivery fell to $6.757 an ounce from $6.936 late Monday.
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