CURRENCY : Dollar Dips as Traders Remain on Sidelines

The dollar finished sharply lower Monday against all major currencies except the Canadian dollar as traders were reluctant to take positions ahead of the presidential election.

Gold prices rose. Republic National Bank of New York reported a late bid of $422.25 an ounce, up slightly from $421.50 on Friday.

The dollar finished lower in European trading and continued to drift steadily downward as activity shifted to the United States. Despite the depth of the currency’s drop, the tone in the currency markets was quiet.

Traders said the dollar was undermined by new polls indicating that Democratic presidential candidate Michael S. Dukakis was narrowing the lead held by Republican Vice President George Bush.

The market perceives that a Bush win would be mildly bullish for the dollar, although traders are at a loss for a clear explanation as to why such a victory would support the currency.

“Regardless of who is becoming president, the market feels the dollar should go lower,” said Stephen Flanagan, an assistant vice president at Manufacturers Hanover Trust Co.

Traders around the world predicted that there would be no substantial move in the dollar until after the election.

“There will be no major position taking before the election, although the market retains its bearish tint,” said Jeff Mondschein, manager of foreign exchange at Chicago-based Continental Illinois National Bank & Trust Co.

In Tokyo, where trading ends before Europe’s business day begins, the dollar fell 0.44 yen to a closing 125.07 yen. Later, in London, it was quoted at a lower rate of 124.68 yen. In New York, the dollar fell to 124.63 yen from 124.93 yen on Friday.

In London, the dollar fell against the British pound. It cost $1.7755 to buy one pound, more expensive than $1.7655 late Friday. In New York, it cost $1.7804 to buy one pound, more expensive than Friday’s $1.7661.

Other late dollar rates in New York, compared to late Friday, included: 1.7772 West German marks, down from 1.7910; 1.4887 Swiss francs, down from 1.5013; 6.0675 French francs, down from 6.1188; 1,320.38 Italian lire, down from 1,330.50, and 1.2358 Canadian dollars, up from 1.2231.

Other late dollar rates in Europe, compared to late Friday, included: 1.7840 West German marks, down from 1.7955; 1.4965 Swiss francs, down from 1.5060; 6.0815 French francs, down from 6.1215; 2.0148 Dutch guilders, down from 2.0253; 1,327.75 Italian lire, down from 1,332.50, and 1.2374 Canadian dollars, up from 1.2223.

Gold prices moved higher. On New York’s Commodity Exchange, gold finished at $422.80 an ounce, up from $421.50 on Friday.

In London, the metal rose to a late bid of $421.75, compared to late Friday’s $420.25. In Zurich, Switzerland, gold rose to a bid of $420.65, compared to $420.50 late Friday. Earlier in Hong Kong, gold was bid at $421.95, up from $420.25 Friday.

Silver bullion prices finished at $6.490 on New York’s Comex, up from $6.425 on Friday. On the London market, the metal was trading at a late bid of $6.45, compared to Friday’s $6.40.