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CURRENCY : Dollar Loses Ground in Choppy Domestic Trading

From Associated Press

The dollar lost some ground in choppy domestic trading Wednesday after rising in foreign exchange trading overseas.

Gold prices were mostly lower. Republic National Bank of New York quoted a late bid of $381.80, compared to $383.00 late Tuesday.

The dollar closed higher in Europe and remained relatively strong when dealing shifted to New York. Traders noted that activity had slowed to a trickle in the afternoon and that buying was mostly speculative in nature.

“The dollar has made a key surge to the upside and is now beginning to stabilize,” said Jack Barbanel, a senior vice president at Gruntal & Co.

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Traders believe that there is still room for interest rates to move higher, despite a spate of recent government statistics showing that the economy may be cooling down. Higher interest rates support the dollar by making dollar-denominated securities more attractive.

The major central banks, with the exception of the influential Bank of Japan, tried to depress the dollar by selling the currency, but analysts noted that their effort was restrained.

While the central banks want to make their presence known, “one gets the impression that they are not willing to really turn the market around at this stage,” said Steve Leach, a currency analyst at Chemical Bank.

Feeding that sentiment were comments by Michael Boskin, chairman of the Council of Economic Advisers, who indicated the dollar remains at competitive levels for U.S. manufacturers despite its rise this week to seven-month highs.

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Also underlying the bullish mood is anticipation of hefty dollar buying from Japan, where the fiscal year is about to end and where a plethora of 10-year bonds are coming due, thereby freeing up a substantial amount of cash that could be invested in U.S. securities.

There is some fear, however, that “if the market keeps pushing the dollar higher, the central banks may respond more aggressively,” Leach said.

Traders said there was little reaction to a Commerce Department report showing the government’s chief economic forecasting gauge dropped 0.3% in February after gaining sharply in the previous two months. The decline had been expected.

In Tokyo, the dollar closed at 133.25 Japanese yen, up from 132.30. Later in London, it traded at 132.73 yen. In New York, the dollar rose to 133.12 yen, from 133.10 yen Tuesday.

The British pound fell after government figures showed British imports continued to grow faster than exports. Britain’s current account deficit totaled $2.88 billion in February, higher than the $2.47 billion deficit analysts had forecast.

The pound has lost nearly 9.5 cents against the dollar since mid-February. One British pound cost $1.6870 in London late Wednesday, cheaper for buyers than Tuesday’s $1.7030. In New York it cost $1.6875 to buy one pound, more expensive than Wednesday’s $1.6855.

Other late dollar rates in New York, compared to late Tuesday, included: 1.8935 West German marks, down from 1.8953; 1.6513 Swiss francs, down from 1.6533; 6.3905 French francs, down from 6.4010; 1,389.00 Italian lire, up from 1,379.50, and 1.1942 Canadian dollars, down from 1.1952.

Other late dollar rates in Europe, compared to late rates Tuesday, included: 1.8910 West German marks, up from 1.8850; 1.6490 Swiss francs, up from 1.6415; 6.3800 French francs, up from 6.3625; 2.1315 Dutch guilders, up from 2.1215; 1,385.65 Italian lire, up from 1,379.50, and 1.1935 Canadian dollars, up from 1.1925.

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Gold prices were mostly lower. On the Commodity Exchange in New York, gold bullion for current delivery closed at $383.30 an ounce, down from $393 on Tuesday.

Gold closed in London at a bid of $382.75 an ounce, down from $387.50.

Tables, Page 17


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