Dollar Eases in Slow Trading; British Pound Climbs Sharply

The dollar drifted lower in light trading Tuesday as the British pound jumped in response to Monday’s increase in British interest rates.

Gold prices were little changed. Republic National Bank of New York said gold was bid at $438 an ounce as of 4 p.m. EDT, up from $437.25 late Friday.

The slight easing in the dollar ended its recent steady advance. Dealers said it was entering a consolidation phase because it had achieved temporary targets of 135 Japanese yen and 1.83 West German marks on Monday and early Tuesday while the New York market was closed.

At the end of the trading day in New York, the dollar fell to 134.33 yen from 135.40 yen late Friday. It hit a 1988 high of 135.50 yen on Monday in London.

“Until the U.S. trade figures (for May) come up, the dollar will remain in a narrow range. But the dollar will be well supported,” said James McGroatry, chief dealer of Discount Corp.

Dealers said demand for dollars by foreign investors remained high and said the dollar’s medium-term outlook was for further rises. The dollar has been riding high for the past three weeks on a healthy outlook for the American economy.

The dollar rose overseas Monday after a U.S. warship shot down an Iranian commercial airliner during the weekend, killing all 290 aboard, but slipped back Tuesday.

The British pound firmed, rising 2 cents to $1.70 in Europe and later jumping to $1.7085 in New York. Dealers said the Bank of England signaled a half-point increase in the British commercial banks’ base lending rate to 10% on Monday, but it took more than half a day for the rate hike to have any impact on the currency, dealers said.

Generally Confident

West Germany’s central bank intervened Tuesday, as it has done regularly in recent days, selling about $92.2 million for marks. The move pushed the dollar lower. The Italian central bank sold about $30 million for lire in concert with the Bundesbank, sources at the Italian central bank said.

“The market still likes the look of the dollar but are a little afraid of the central banks,” said John Lorry, a corporate trader at Chase Manhattan Bank in London.

Other late dollar rates in New York, compared to late Friday’s rates, included: 1.8204 West German marks, down from 1.8295; 1.5148 Swiss francs, down from 1.5233; 1.2129 Canadian dollars, down from 1.2215; 6.1415 French francs, down from 6.1595, and 1,351.50 Italian lire, down from 1,352.50.

There was no U.S. trading in currencies or precious metals Monday because of the Independence Day holiday.

Other late dollar rates in Europe, compared to late Monday’s rates, included: 1.8235 West German marks, down from 1.8295; 1.5165 Swiss francs, down from 1.5233; 6.1430 French francs, down from 6.1595; 2.0600 Dutch guilders, up from 2.0575; 1,355.50 Italian lire, up from 1,353.25, and 1.2134 Canadian dollars, down from 1.2215.

Bullion Steady

In Hong Kong, gold rose to a closing bid of $440.41 an ounce from $439.64 bid at Monday’s close.

Gold finished in London at a late bid of $437.25, unchanged from Monday. In Zurich, Switzerland, gold was also unchanged at $437.50.

Later, on the Commodity Exchange in New York, gold bullion for current delivery rose to $438.10 from $437.20 late Friday.

Silver prices rose on the London market, where the metal was trading at a late bid of $6.74 an ounce, compared to $6.73 late Monday. On New York’s Comex, silver bullion for current delivery rose to $6.766 from $6.703.

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