CURRENCY : Dollar Gains Despite Intervention by Fed, W. Germany
The dollar finished higher against most major currencies Monday despite concerted central bank intervention to stem its rise.
Gold prices were mixed. Republic National Bank of New York said gold was bid at $430.20 an ounce as of 4 p.m. EDT, down from $432 an ounce late Friday.
The dollar gained ground at home and in Europe as traders continued to react favorably to last week’s better-than-expected employment report for July and revised data for June.
“The dollar continues to advance on the strength or perceived strength of the U.S. economy,” said James McGroarty, vice president at Discount Corp.
“People are feeling optimistic that the (Federal Reserve) might move further in terms of raising interest rates” to hold down inflation, he said. Higher interest rates make dollar-denominated investments more attractive.
Both the Fed and West Germany’s Bundesbank intervened sporadically throughout the session to keep the dollar from rising too sharply against the West German mark. But while the action slowed the dollar’s rise, “it’s not stopping it,” noted Ron Shapiro, chief dealer at Harris Trust & Savings Bank in Chicago.
The dollar pierced through 1.90 marks, a level not seen since January, 1987, forcing traders to revamp their outlook for the dollar. Some now speculate that the U.S. currency could top 1.95 marks in the near-term.
“It seems the authorities are trying to send signals that they are sincere in keeping the dollar from moving much higher, but the market is choosing to ignore them,” McGroarty said.
In London, one British pound rose to $1.7022 late Monday, from Friday’s late $1.6977. In New York it cost $1.7005 to buy one pound, more expensive than $1.6878 on Friday.
But the dollar moved higher against most other currencies.
Other late dollar rates in New York, compared to late rates Friday, included: 1.9001 West German marks, up from 1.8948; 1.5883 Swiss francs, up from 1.5826; 6.4115 French francs, up from 6.3865; 1,402.00 Italian lire, up from 1,396.50, and 1.2110 Canadian dollars, up from 1.2069.
Gold rose in Hong Kong to close at $434 an ounce from Saturday’s $433.99.
In London, gold closed at a bid of $432.25 an ounce, up from $432.10 late Friday. But it fell in light trading in Zurich to $432 an ounce from $433 Friday.
On the Commodity Exchange in New York, gold bullion for August delivery fell to $430.40 an ounce from $432.30 late Friday.
Silver bullion traded late in London at a bid of $6.78 an ounce, down from $6.89. On New York’s Comex, silver bullion for August delivery slipped to $6.675 an ounce, from $6.855 late Friday.
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