CURRENCY : Dollar Loses Ground Amid Profit Taking
The dollar slipped Tuesday, as profit taking pushed the currency lower against all major currencies except the Canadian dollar.
Gold prices were mixed. Republic National Bank in New York quoted a late bid for gold of $436.25 an ounce as of 4 p.m. EDT, up from Monday’s late bid of $434.50.
Traders said they had expected a slight selloff of the dollar, which rose to recent highs against several major currencies Monday despite concerted central bank intervention.
Concern that the central banks might step in again to sell dollars may have kept the currency from climbing, analysts said.
The dollar’s slow, measured decline began early in Tokyo and then continued when trading shifted to Europe. In New York, the currency settled at the lows of the day.
Higher Deficit Expected
But traders said bullish sentiment surrounding the U.S. currency remains intact. “The dollar hasn’t dropped very far--there’s still very good demand in the market,” said Stephen Flanagan, an assistant vice president at Manufacturers Hanover Trust Co.
“People are re-examining what’s ahead of us and squaring up their positions,” he said, referring to the government’s report on the nation’s May trade deficit, which is due out Friday.
The consensus among analysts is that the May report will register about $11 billion, up from the $9.9-billion deficit reported for April, which was the lowest imbalance in three years.
In the past, the dollar has plunged in response to an unexpected widening of the trade gap and soared when it narrowed.
But Craig Sloane, a currency analyst at Smith Barney, Harris Upham & Co., noted that the trade numbers were more of an obsession earlier in the year.
“The dollar has made big moves without the trade numbers, and the trend to a much stronger dollar has become much more visible in the last few months,” he said.
Sloane said the dollar might be influenced by comments by Federal Reserve Board Chairman Alan Greenspan, who is to testify before the Senate Banking Committee on monetary policy Thursday.
In Tokyo, where trading ends before Europe’s business day begins, the dollar fell 0.63 Japanese yen to a closing 132.70. Later, in London, it was slightly lower at 132.63 yen. In New York, the dollar closed at 132.51 yen, down from 133.07 Monday.
In London, the British pound closed at $1.6960, up from $1.6900 late Monday. In New York, it cost $1.6970 to buy one pound, more expensive than Monday’s $1.6925.
Gold Rises
Other late dollar rates in New York, compared to late rates Monday, included: 1.8365 West German marks, down from 1.8423; 1.5187 Swiss francs, down from 1.5305; 6.1970 French francs, down from 6.2065; 1,361.75 Italian lire, down from 1,367.25, and 1.2103 Canadian dollars, up from 1.2072.
Other late dollar rates in Europe, compared to late Monday, included: 1.8376 West German marks, down from 1.8460; 1.5235 Swiss francs, down from 1.5350; 6.1940 French francs, down from 6.2080; 2.0745 Dutch guilders, down from 2.0750; 1,363.25 Italian lire, down from 1,364.50, and 1.2100 Canadian dollars, up from 1.2080.
On New York’s Commodity Exchange, gold cost $437 an ounce, up from $434.60 Monday.
In Europe, gold closed in London at a late bid of $436.50, up from $435.10. But in Zurich, Switzerland, gold fell $2 to $433.50. Earlier in Hong Kong, gold fell $4.41 to close at $437.63.
Silver bullion rose on New York’s Comex to $6.974 an ounce from $6.937 on Monday. In London, the metal finished at a bid of $6.91, down from $6.94.
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