CURRENCY : Dollar Gets a Boost From Fed Officials’ Comments

The dollar finished mostly higher Wednesday despite reports of central bank intervention, as investors interpreted comments by Federal Reserve officials as supportive of the currency.

Gold prices rose.

Traders said the dollar started to climb when Federal Reserve Governor Wayne D. Angell began testifying before the Senate Banking Committee.

Speaking ahead of Federal Reserve Board Chairman Alan Greenspan, Angell said the dollar should be kept “appropriately scarce” at home and abroad.

“Angell started the ball rolling,” said James McGroarty, a vice president at Discount Corp. “And as the day wore on, Greenspan’s comments were equally constructive for the dollar.”

Delivering his midyear report on monetary policy, Greenspan said the Fed and other central banks would continue to work for stable international exchange rates. He said he saw no evidence that the growth of U.S. exports has been affected by the recent appreciation of the dollar.

Despite the positive tone, traders said the Fed intervened twice to sell dollars as the currency tested barriers on the upside. Some market watchers speculated that the Fed merely wanted to subdue the move in the dollar, which had been gathering considerable upward momentum but finished off its highs.

Concern Over Deficit

Trading was peppered by bursts of activity during the Fed officials’ testimony.

Dealers remain concerned about the upcoming report on the U.S. trade deficit for May, due Friday. “I’m not sure if the dollar’s going to make another run (up) before the trade figures,” said Earl Johnson, a vice president at the Chicago-based Harris Trust & Savings Bank.

He said investors typically get nervous before the report, which in the past has sparked large swings in the currency.

The dollar finished mostly higher earlier in Europe, where traders interpreted Greenspan’s testimony as mildly bullish.

Although neither Angell or Greenspan said anything unexpected, “any news that isn’t bad news is taken as good news,” said David Deacon, a senior dealer at EBC-Amro bank in London.

In Tokyo, the dollar fell 0.23 Japanese yen to 132.47 yen. Later in London, it rose to 132.83 yen. In New York, the dollar closed at 132.70 yen, up from 132.51 Tuesday.

In London, it cost $1.6920 to buy one pound, cheaper than $1.6960 late Tuesday. The dollar also gained against the pound in New York, where it cost $1.6948, compared to $1.6970 on Tuesday.

Gold Prices Higher

Other late dollar rates in New York, compared to late Tuesday’s, included: 1.8424 West German marks, up from 1.8365; 1.5285 Swiss francs, up from 1.5188; 6.2140 French francs, up from 6.1970; 1,365.88 Italian lire, up from 1,361.75, and 1.2072 Canadian dollars, down from 1.2103.

Other late dollar rates in Europe, compared to late Tuesday’s, included: 1.8460 West German marks, up from 1.8376; 1.5313 Swiss francs, up from 1.5235; 6.2265 French francs, up from 6.1940; 2.0835 Dutch guilders, up from 2.0745; 1,367.75 Italian lire, up from 1,363.25, and 1.2083 Canadian dollars, down from 1.2100.

Gold prices rose. Precious metals dealers predicted that gold prices would be affected by the trade report and said many traders are waiting to see the data’s effect on the dollar before entering the market.

Republic National Bank in New York quoted a late bid for gold of $440.25 an ounce as of 4 p.m. EDT, up from $436.25 on Tuesday.

On the New York Commodity Exchange, gold closed at $440.40, up from $437.

In London, gold closed at a bid of $437.25, up from $436.50. In Zurich, Switzerland, gold finished at $435.50, up from $433.50. Earlier in Hong Kong, gold rose 65 cents to close at $438.28.

Silver bullion on New York’s Comex rose to $7.165 an ounce from $6.974 on Tuesday. In London, the metal finished at $6.98, up from $6.91.

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