CURRENCY : Dollar Down in Busy Session; Gold Higher

The dollar moved decidedly lower in hectic trading Thursday amid concerns that the currency’s new-found strength would not be tolerated.

Gold prices finished slightly higher. Republic National Bank of New York quoted a bid of $429.30 for an ounce of gold as of 4 p.m. EDT, up from $428.80 late Wednesday.

The dollar had been losing ground but radically changed direction upward when several of the nation’s leading banks hiked their prime lending rate to 10%, up half a percentage point to its highest level in more than three years.

“When the prime came out, people rushed to buy dollars and we had a rally, but that just ended up giving sellers a better level to sell at,” said George DeLuna, a vice president at Irving Trust Co.

The currency was unable to sustain the gains. Statements by West German Finance Minister Gerhard Stoltenberg and continued talk of a Group of Seven meeting also had a dampening effect on the dollar.

Stoltenberg’s comments to reporters that further increases in the dollar would be “problematic” pushed the currency lower both in Europe and at home.

And rumors that the dollar’s strength would be the topic of discussion at a meeting of the Group of Seven major industrial nations--the United States, Japan, Great Britain, West Germany, France, Italy, and Canada--continued to circulate even though no meeting has been scheduled.

Market Nervous

Traders speculated that at least one central bank had entered the market during the trading session. While it was unclear whether the Federal Reserve was on hand selling dollars, DeLuna said, “whoever did it did a good job of concealing who they were.” He said the dollar was sold mainly against the West German mark, but other currencies also were affected.

Earl Johnson, a vice president at Harris Trust & Savings Bank in Chicago, said all the rumors “basically got the market pretty nervous,” and the dollar fell through several technical resistance levels.

In Tokyo, where the business day ends before Europe’s begins, the dollar fell 0.85 Japanese yen to a closing 134.07 yen. Later in London, it was quoted lower at 133.65 yen. In New York, the dollar closed at 132.74 yen, down from 133.68 yen on Wednesday.

In London, the dollar fell against the British pound. It cost $1.7010 to buy one pound, more than $1.6910 late Wednesday. In New York, it cost $1.7103 to buy one pound, more expensive than Wednesday’s $1.6971.

Other late dollar rates in New York, compared to late rates Wednesday, included: 1.8833 West German marks, down from 1.9068; 1.5735 Swiss francs, down from 1.5955; 6.3863 French francs, down from 6.4505; 1,397.50 Italian lire, down from 1,409.50, and 1.2198 Canadian dollars, down from 1.2274.

Gold Closes Higher

Other late dollar rates in Europe, compared to late rates Wednesday, included: 1.8995 West German marks, down from 1.9155; 1.5905 Swiss francs, down from 1.5995; 6.4350 French francs, down from 6.4780; 2.1425 Dutch guilders, down from 2.1655; 1,406.50 Italian lire, down from 1,414.00, and 1.2231 Canadian dollars, down from 1.2273.

Gold prices firmed somewhat. On New York’s Commodity Exchange, gold for current delivery closed at $429.30 an ounce, up slightly from $429.20 on Wednesday.

Gold in London was unchanged at $428.25. In Zurich, Switzerland gold closed $428.65, compared to $427.

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