CURRENCY : 3 Central Banks Intervene to Slow Dollar’s Rise

The dollar finished weaker against most key foreign currencies in trading Monday, hurt by aggressive selling by central banks and a possible breakthrough in the Iran-Iraq war.

Gold prices also fell. Republic National Bank of New York quoted bullion at $437.50 an ounce as of 4 p.m. EDT, down from $440 Friday.

Currency brokers said the central banks of the United States, West Germany and Britain intervened actively in the foreign exchange markets, selling dollars to deflate the currency’s rising value.

Some said the Federal Reserve sold dollars at least three times during the day. The Fed and other central banks do not comment on their intervention activities.

“Even as the dollar was coming down, they would sell more dollars,” said Zlatko Glamuzina, chief foreign exchange dealer at the Banco di Sicilia’s New York branch.

“I think it’s not so much to stop the dollar from going higher as to slow the rise,” Glamuzina said. “They just don’t want the speculation to get out of hand.”

The central bank action came against a background of growing attraction for the dollar, which has risen to the highest levels since early last year.

A higher dollar attracts more foreign capital to the United States and raises demand for domestic stocks and bonds. But some U.S. economists fear that a rapidly appreciating dollar could reverse the nation’s slowly improving balance of trade by making American exports more expensive and imports cheaper.

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