CURRENCY : Dollar Regains Ground in Light Trading

The dollar bounced back Monday from last week’s official attempts to restrain it, but trading was light because of a banking holiday in Britain.

Central banks, which had sold dollars repeatedly last week to drive down the U.S. currency, stayed out of the markets Monday. That gave traders an opportunity to see how high they could push the dollar.

“The market realized it (the decline) was just a little overdone,” said Mark Pletscher, an assistant vice president at BankAmerica International in New York.

“I think we’re going to go back to the reason we were buying the dollar all along,” namely high interest rates that make dollar-denominated securities attractive, Pletscher said.

Holiday Clouds Picture

In addition to dollar sales, the U.S. currency was knocked down last week by a coordinated round of interest rate hikes in Europe and a strongly worded defense of the West German mark by the head of the nation’s central bank, Karl Otto Poehl.

Dealers said the banking holiday in Britain deprived market participants of trading partners and made it difficult to predict whether the dollar’s rise was a true sign of a trend.

“Those few who are in the market are simply puttering about,” said a dealer at a major West German bank in Frankfurt.

In Tokyo, where trading ends as Europe’s business day begins, the dollar gained sharply, closing up 0.70 yen at 134.20 yen. Later, in Europe, it was also quoted at 134.20 yen. In New York, the dollar rose to 134.54 yen from 133.78 late Friday.

The dollar made solid gains against the British pound. One pound cost $1.6840 in European trading, cheaper than $1.7025 in London late Friday. The dollar also rose in New York. It cost $1.6809 for a pound, cheaper than $1.6870 late Friday.

Other late dollar rates in New York, compared to late Friday’s rates, included: 1.8720 West German marks, up from 1.8573; 1.5778 Swiss francs, up from 1.5681; 1.2386 Canadian dollars, down from 1.2392; 6.3420 French francs, up from 6.3065, and 1,390.50 Italian lire, up from 1,382.00.

Other late dollar rates in Europe, compared to late Friday’s London rates, included: 1.8693 West German marks, up from 1.8565; 1.5772 Swiss francs, up from 1.5655; 6.3500 French francs, up from 6.3010; 2.1120 Dutch guilders, up from 2.0970; 1,389.50 Italian lire, up from 1,380.50, and 1.23935 Canadian dollars, up from 1.23725.

Gold Mostly Lower

London bullion markets were closed for the bank holiday. Financial markets in Hong Kong, another major bullion trading center, were also closed for a holiday.

In light trading in Zurich, gold closed unchanged from Friday at a bid of $432.

Later in New York, gold prices fell. Republic National Bank of New York quoted a late bid of $429.40, down from $432 Friday.

On the Commodity Exchange in New York, gold bullion for current delivery fell to $429.40, down from $432.10 Friday. Silver bullion for current delivery fell to $6.520 from $6.655 an ounce Friday.

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