CURRENCY : Dollar Skids to Postwar Low Against Mark

The dollar slid to a postwar low against the German mark and a 10-year low against the British pound Wednesday as traders, sensing further cuts in interest rates, sold the U.S. currency despite attempts by central banks of leading industrial nations to prop up the U.S. currency.

The dollar’s fall in recent days has been prompted by the belief that the Federal Reserve will lower interest rates even further to stimulate the economy.

Lower domestic rates tend to decrease the value of the dollar since dollar-denominated investments earn less interest than investments made in nations with higher interest rates.

In New York, the dollar stood at 1.448 marks in domestic trading at late afternoon, a new postwar low, down from 1.457 marks late Tuesday. The previous low of 1.456 marks was set Monday.

The pound strengthened against the dollar, crossing the $2 level in a rate not seen since 1981. One pound cost $2.004 in New York, more expensive than $1.992 Tuesday.

Against the Japanese yen, the dollar fell to 128.20 from 129.60.

Other late dollar rates in New York, compared to late Tuesday, included: 1.231 Swiss francs, down from 1.243; 4.932 French francs, down from 4.962; 1,088 Italian lire, down from 1,095; and 1.157 Canadian dollars, down from 1.158.

The U.S. currency slid despite two waves of concerted intervention by central banks, including the Federal Reserve and Germany’s Bundesbank. The Fed first bought dollars at around 1.457 marks.

Ten banks intervened on Wednesday, compared to nine banks Monday. On Tuesday, the Fed was alone intervening twice to buy the dollar.

Credit

Bond prices rose after the second part of the government’s quarterly auction attracted strong demand.

The Treasury’s 30-year bond climbed 1/4 point, or $2.50 per $1,000 in face amount. Its yield, which falls when the price rises, fell to 8% from 8.02% late Tuesday. The bond yield hasn’t been below 8% since late December of 1989, but now is threatening to break through that barrier.

Traders said activity was light in advance of the government’s auction of $11 billion in 10-year notes. But they said the Treasury lowered prices in an effort to stimulate sales and demand jumped.

Traders said the good results of the auction triggered more retail buying, and the long bond finished at its highs for the day.

The federal funds rate, the interest on overnight loans between banks, rose to 3% from 2% late Tuesday. Traders said the low levels were due to technical factors rather than a change in monetary policy by the Federal Reserve.

Commodities

Gold and silver futures prices sagged Wednesday beneath the weight of slack investor demand for precious metals as a war hedge.

Gold settled $3.50 to $3.90 lower on New York’s Commodity Exchange, with the contract for delivery in February at $362.90 an ounce. February silver slid 6.9 cents to $3.77.

April platinum posted a five-year and life-of-contract low of $379.50 an ounce before rebounding to end at $379.70, down $7.30.

Sharply higher prices for home heating oil lifted energy futures prices on the New York Merc. A cold snap in Europe, expected to last most of this week, boosted buying.

Light sweet crude oil futures finished 11 to 83 cents higher, with March at $21.49 a barrel. Heating oil was 51 to 3.29 cents higher, with March at 66.35 cents a gallon.