CURRENCY : Dollar Declines as Central Banks Remain on Sidelines
The dollar weakened Monday against major foreign currencies in the absence of central bank buying.
Gold prices also declined. Republic National Bank quoted a late bid of $415.50 an ounce, down $1.25 from late Friday.
The dollar had strengthened in Tokyo but turned lower in Europe after remarks from President-elect George Bush affirming that he won’t raise taxes to narrow the huge federal budget deficit.
“It’s been a slow decline all day,” said Ronald H. Holzer, chief currency dealer for Harris Trust & Co. in Chicago.
Renewed worries about the U.S. trade and federal budget deficits have pushed the dollar sharply lower in recent weeks, prompting central banks around the world to buy dollars Thursday and Friday to prop up the currency’s value.
But Holzer and other dealers reported a lack of central bank intervention Monday.
Worries Over Economy
“The absence of intervention today allowed the dollar to . . . fall, that, and the remarks from Bush,” Holzer said.
At issue is whether Bush and the Democratic-controlled Congress can agree on spending cuts needed to trim the budget deficit. If left unchecked, dealers fear, it ultimately will hurt the U.S. economy.
In Tokyo, where trading ends before Europe’s business day begins, the dollar closed at 122.52 Japanese yen, up from 122.40 yen late Friday. But in late London trading, the dollar fell to 122.20 yen, and in New York it slipped to 122.025 yen, down from 122.60 late Friday.
The British pound cost $1.8175 in London, more expensive for buyers than Friday’s late $1.8160. Later in New York, sterling fetched $1.8235, down from $1.8155 late Friday.
Other late dollar rates in New York, compared to late Friday, included: 1.72815 West German marks, down from 1.7370; 1.45495 Swiss francs, down from 1.4600; 1.20695 Canadian dollars, down from 1.2300; 5.9070 French francs, down from 5.9365, and 1,284.575 Italian lire, down from 1,292.00.
Silver Also Falls
Late dollar rates in Europe, compared to late Friday, included: 1.7305 West German marks, down from 1.7360; 1.4575 Swiss francs, down from 1.4585; 5.9305 French francs, down from 5.9340; 1.9550 Dutch guilders, down from 1.9610; 1,288.62 Italian lire, down from 1,293.75, and 1.2117 Canadian dollars, down from 1.2343.
The Canadian dollar gained more than two cents in European and domestic trading against the dollar on the heels of Saturday’s opinion polls predicting victory in Monday’s Canadian general election for Prime Minister Brian Mulroney’s Conservatives.
On the New York Commodity Exchange, gold for current delivery fell to $415.80 an ounce from $417.40 late Friday.
Gold bullion closed in London at $416.75, down from $417.75 bid late Friday. The late price in Zurich, Switzerland, was $416.50, down from $417.80.
Earlier, in Hong Kong, gold closed at $418.79, down from $419.12.
Silver prices also declined. On the New York Comex, silver fell to $6.010 an ounce from $6.08 Friday. Bullion traded late in London at a bid $6.04, down from $6.09.
