CURRENCY : Dollar Gains in Mild Rally; Gold Slips

The dollar strengthened Tuesday in a mild rally that dealers attributed to year-end demand for the currency and some optimism that an impending report on the monthly U.S. trade deficit would not cause alarm.

Gold prices weakened slightly in U.S. trading after rising in Europe and falling in Asia. Republic National Bank quoted bullion at $419.50 an ounce at 4 p.m. EST, down 75 cents from its late Monday quote.

Currency strategists said stepped-up commercial demand for dollars, a usual occurrence at the end of the year, was partly behind the dollar’s strength.

They also said there was a consensus in the market that the U.S. trade deficit for October, to be reported Wednesday by the Commerce Department, would be around $10.5 billion. Expectations of that figure, which would be substantially unchanged from the previous month, also helped the dollar.

The trade statistics fluctuate sharply but have enormous potential to affect the dollar because they are the most visible evidence of American competitiveness abroad. A widening deficit would put downward pressure on the dollar while a narrowing gap would tend to strengthen the currency.

In Tokyo, the dollar rose 0.14 Japanese yen to close at 123.06 yen. Later in London, the dollar was quoted at 123.09 yen. By the time trading closed in New York the dollar fetched 123.29 yen, up from 122.80 yen late Monday.

In London, the pound fell to $1.8280 from $1.8418 Monday. In New York, sterling fetched $1.8190, down from $1.8435 late Monday.

Other late dollar rates in New York, compared to late Monday’s rates, included: 1.7497 West German marks, up from 1.7415; 1.4717 Swiss francs, up from 1.4642; 1.1999 Canadian dollars, up from 1.1970; 5.9790 French francs, up from 5.9485, and 1,288.71 Italian lire, up from 1,284.25.

Other late dollar rates in Europe, compared to late Monday’s rates, included: 1.7470 marks, up from 1.7410; 1.4705 Swiss francs, up from 1.4650; 5.9775 French francs, up from 5.9520; 1.9715 Dutch guilders, up from 1.9635; 1,286.50 Italian lire, up from 1,282.75, and 1.1995 Canadian dollars, up from 1.1983.

Gold prices moved in a narrow range, largely reflecting internal market influences. On the Commodity Exchange in New York, bullion for current delivery finished down 30 cents an ounce at $419.80.

Earlier in London, gold rose $1 an ounce to $420.75; in Zurich, gold rose $1.20 an ounce to $420.45, and in Hong Kong it fell 75 cents to $421.54.

Silver bullion for current delivery fell 0.1 cent an ounce to $6.168. In London, silver rose 3 cents to $6.17.