Dollar Selling Brings Lackluster Results

Central banks sold waves of dollars again Tuesday, but the results failed to measure up to Monday’s successful intervention in currency markets. The dollar declined only slightly overall and actually rose against Japan’s yen.

The Group of Seven industrial democracies ganged up against the dollar after agreeing last weekend that the dollar’s rise in recent months was “inconsistent with longer run economic fundamentals.”

Tuesday’s intervention knocked only a fraction of a percent off the dollar’s value, in contrast with Monday’s decline of nearly six West German pfennigs and four Japanese yen.

Some traders said the attractiveness of U.S. interest rates might bring investors back to dollar-denominated securities once the central bankers let up.

In fact, the dollar ended the day above its lows of the session.

“Maybe the dollar has taken it just a little bit on the chin but it has fought back quite nicely,” said Victor Polce, vice president and manager of corporate foreign exchange at Algemene Bank Nederland NV in New York.

Dealers agreed that most of the major government banks had sold dollars, but they disagreed on how large the sales were.

Some of the dollar’s drop against the West German mark came from continued speculation that the West German central bank would raise a key interest rate next month, drawing global investors away from dollars and into marks.

In contrast, the dollar rose against the Japanese yen because fewer people expected the Bank of Japan to raise rates, dealers said.

The Group of Seven consists of the United States, Japan, West Germany, France, Britain, Italy and Canada.

British Pound Gains

In Tokyo, the dollar fell 0.15 Japanese yen to a closing 142.80 yen from 142.95 yen at Monday’s close. Later, in London, it fell further to 142.50 yen. In New York, it rose to 142.35 yen from 142.13 yen on Monday.

In London, the British pound rose to $1.6215 from $1.6080 late Monday despite Tuesday’s announcement of a worse-than-expected merchandise trade deficit of 2.29 billion pounds, or $3.69 billion, in August. In New York, the pound rose to $1.6190 from $1.6175 on Monday.

Other late dollar rates in New York, compared to Monday’s late rates, included: 1.8918 West German marks, down from 1.8990; 1.6415 Swiss francs, down from 1.6480; 1.1756 Canadian dollars, down from 1.1763; 6.4110 French francs, down from 6.4370, and 1,366.9 Italian lire, down from 1,372.9.

Other late dollar rates in Europe, compared to late Monday, included: 1.8885 West German marks, down from 1.9055; 1.6390 Swiss francs, down from 1.6565; 6.3990 French francs, down from 6.4540; 2.1480 Dutch guilders, unchanged; 1,377.00 Italian lire, unchanged, and 1.1750 Canadian dollars, down from 1.1776.

Gold rose in thin London trading to a late bid of $367.75 an ounce from $367 late Monday.

In Zurich, Switzerland, the metal rose to $367.75 from $366.75.

Earlier, in Hong Kong, gold fell 33 cents an ounce to a closing bid of $367.53.

On the Commodity Exchange in New York, gold bullion for current delivery fell to $368.50 from $369.80. Later, Republic National Bank of New York said gold was bid at $367.30 as of 4 p.m. EDT, down from $368.

Silver bullion rose in London to a late bid of $5.31 an ounce from $5.27 late Monday. On New York’s Comex, silver bullion for current delivery fell to $5.263 from $5.283.