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Dollar Hits 5 More Highs as Gold Sinks : Sets Records Against Britain, Spain, Italy Canada and France

February 26, 1985|Associated Press

LONDON — The dollar staged a broad and powerful advance Monday to extend its historic rally as European central banks apparently refused to intervene against the currency's surge.

It was the 15th record-setting day for the dollar out of 17 business days this month, a performance that caused an astonished trader in Frankfurt, West Germany, to exclaim: "Every morning when we come in, the previous day's closing price looks cheap."

As the dollar resumed its climb, gold prices tumbled to a 5 1/2-year low. Republic National Bank in New York said gold bullion was bid at $283 an ounce, down $12 from Friday.

In its rise to new heights, the dollar set records against the currencies of Britain, Canada, France, Italy and Spain, rocketed to 13-year highs against the West German mark and the Dutch guilder and rose to a 10-year high against the Swiss franc.

Record Broken

The Federal Reserve Board said in Washington that its index of the dollar against 10 other currencies, weighted for international trade, shot up to a new high of 164.50 from the previous record of 162.09 on Friday. The index stood at 100 in March, 1973, and had slipped to 85.82 as the 1980s began.

Morgan Guaranty Trust Co. in New York said the dollar jumped to a record 40.9% above its average market value for the years 1980-82 as measured by its traded-weighted index against 15 other currencies.

"Fundamentally, the strong dollar reflects the bright performance of the U.S. economy compared to the lackluster behavior of other nations," Morgan Guaranty said in a quarterly economic report. "Foreign investors see that U.S. inflation is low, that innovative American companies offer attractive profit opportunities and that the political climate is reassuringly stable."

And the bank said that over the near term "foreign capital seems likely to continue flowing in at a rapid rate, helping to assure a strong dollar."

Traders said the markets were nervous, hectic and volatile.

One currency to recover some lost ground against the dollar was the Japanese yen.

The dollar rose to 263.05 yen in Tokyo from 262.35 yen on Friday. But by the end of the trading day in the United States, the dollar had slipped to 262.50 yen from 263.14 yen late Friday. There was unconfirmed speculation among traders that the Bank of Japan had sold dollars to support the yen.

New York Prices

In London, the British pound dropped to a new low of $1.056 from $1.073 on Friday. Later in New York, sterling fell to $1.05295 from $1.0730.

Dollar rates in New York, compared to late rates Friday, included: 3.4435 West German marks, up from 3.3970; 2.9160 Swiss francs, up from 2.85875; 10.5300 French francs, up from 10.3750, and 1.3990 Canadian dollars, up from 1.39075.

Gold began the trading day by moving up 72 cents in Hong Kong to close at a bid of $297.18 an ounce.

But as the dollar roared ahead in Europe, gold fell sharply.

In Europe, gold bullion plunged $15.25 in London to a late bid of $284 an ounce, and gold fell $15 in Zurich to $283.50 an ounce.

On New York's Commodity Exchange, gold bullion for current delivery fell $12.30 to close at $282 an ounce, the lowest finish since the $281.40 of Aug. 6, 1979.

Silver, drawn down by both gold and the dollar, plummeted in London to a late bid of $5.585 an ounce from $5.990 late Friday. Later, on New York's Comex, silver bullion for current delivery fell 38 cents to $5.54 an ounce.

Foreign exchange tables are on Page 13.

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