CURRENCY : Dollar Jumps Despite Banks’ Heavy Selling

The dollar zoomed to recent highs against several major currencies Friday on a continuing wave of bullish sentiment that overwhelmed heavy selling by central banks around the world.

The dollar’s rise began in foreign markets and was bolstered here by the release of the most recent figures on the U.S. trade deficit.

So strong was the dollar’s move, the currency managed to finish at the highs of the day even after the Federal Reserve and a host of European central banks intervened to subdue its steady climb. Traders speculated that the banks collectively may have sold as much as $2 billion or more.

Gold prices were mixed.

The Commerce Department’s report on the merchandise trade deficit for May came in at $10.9 billion, supporting views that the nation’s trade imbalance is improving.

But the dollar did not wait for the release of the trade numbers to start moving upward.

“It was really uncanny because . . . even before the release of the trade numbers, we sensed a great deal of buying from Europe,” said Marc Cohen, manager of corporate foreign exchange at Republic National Bank in New York.

Attributing the dollar’s rise strictly to the trade report would be “underplaying the overall positive sentiment toward the dollar. That sentiment is already built into the market,” Cohen said.

Intervention was heavy in both European and domestic dealings. Traders in Europe said the Swiss, Dutch, Belgian, British, Italian and Swedish central banks joined in when the Bundesbank began selling dollars.

The Fed was actively selling dollars in the domestic market, but the currency proceeded to pierce key psychological barriers against several currencies.

The dollar finished at 133.40 yen in Tokyo, up 0.45 from Thursday. It was quoted at 135.35 yen in London and 135.45 yen in New York.

In London, the dollar gained more than 2.5 cents against the British pound to reach its highest level since October. It cost $1.6635 to buy one pound, cheaper than $1.6890 late Thursday.

In New York, the dollar put in its best showing since October against the pound, which cost $1.6605, far cheaper than Thursday’s $1.6875.

The dollar finished at its highest levels against the Italian lire and the French franc in 18 months and its highest levels against the West German mark, the Swiss franc, and the Dutch guilder since last summer.

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