NEW YORK — The dollar tumbled to its lowest levels since mid-December in light but volatile trading Friday, extending a decline that has dragged it down nearly 10% from the record heights of late February.
"Market sentiment has changed significantly," said David Arbesman, a first vice president and director of currency markets at Prudential-Bache Securities Inc. in New York.
Gold prices rose as the dollar fell. Republic National Bank in New York said gold bullion was bid at $329.50 an ounce as of 4 p.m. EST, up $2.50 from the late bid Thursday and a gain of $13.50 from the end of the previous week.
A major winner as a result of the dollar's slide has been the British pound, which rose to $1.2305 in London from $1.2290 late Thursday and $1.1740 at the end of the previous week. Later in New York, the pound shot up to $1.2460 from $1.2275 late Thursday.
'People Are Disenchanted'
The dollar now has tumbled about 20% against the pound since Feb. 26, when sterling dropped to an all-time low of $1.0395.
"People are disenchanted with the dollar," said Howard Kurz, chief currency trader at the New York international trading center of Bank of America. Kurz said traders are turning to the pound because of returns of about 14% available on short-term sterling-denominated investments, against about 9% on dollar-denominated accounts in Europe.
The Federal Reserve said its measure of the dollar against 10 other currencies dropped 1.6% Friday, bringing its loss for the week to 4% and its slide since peaking on Feb. 25 to 9.9%. The dollar also is down 2% from the end of last year.
Even government reports indicating strength in the U.S. economy failed to stem the sell-off. The Commerce Department said its index of leading economic indicators, a barometer for the economy, rose a healthy 0.7% in February, and a separate report said sales of new single-family homes rose 6.2% last month.
Ohio S&L Closings
But currency dealers in the United States and Europe said traders are selling dollars because of worries over the soundness of the financial system in the United States, following a highly publicized closing of 70 Ohio savings and loans earlier in the month and reports of loan problems at Texas banks.
"Prospects of bank failures really scared Europeans," said Lawrence Kreicher, an international economist at Irving Trust Co. in New York.
But Kreicher said he believed that the sell-off against the dollar is an overreaction by traders and he is among analysts who are predicting a rebound from the dollar's slump later in the year, based on expectations of stronger economic growth in the United States.
"The leading indicators may be the first glimmer of better economic news coming down the pike," he said.
In Tokyo, the dollar fell to 250.70 Japanese yen from 253.30 yen Thursday and 254.90 yen last Friday. Later in London, the dollar was quoted at 251.25 yen, but by the end of the trading day in the United States, the dollar had fallen to 250.50 yen from 253.10 yen late Thursday.
Rates in Europe
Other late dollar rates in Europe, compared to late rates Thursday and with last Friday's rates in parentheses, included: 3.0900 West German marks, down from 3.1250 (3.2200); 2.6150 Swiss francs, down from 2.6525 (2.7265); 9.4350 French francs, down from 9.5545 (9.8300); 3.4850 Dutch guilders, down from 3.5340 (3.6305); 1,972.50 Italian lire, down from 2,008.00 (2,048.50), and 1.3705 Canadian dollars, down from 1.3715 (1.3750).
Dollar rates in New York as of 4 p.m. EST, compared to late rates Thursday, included: 3.0575 West German marks, down from 3.12075; 2.5825 Swiss francs, down from 2.64375; 9.3550 French francs, down from 9.5275, and 1.3640 Canadian dollars, down from 1.3710.
Gold rose $3.06 in Hong Kong to close at a bid of $331.28 an ounce.
In Europe, gold bullion climbed $3.25 to a late bid of $330 an ounce, and gold gained $2.50 in Zurich to close at $329.50 an ounce.
On New York's Commodity Exchange, gold bullion for April delivery climbed $2.80 to end the week at $329.60 an ounce. A week earlier, gold for current delivery finished at $316.40 an ounce.
Silver rose to a late bid of $6.675 an ounce in London $6.580 late Thursday. Later on New York's Comex, silver bullion for current delivery rose to $6.687 an ounce from $6.582 on Thursday and $6.325 a week earlier.