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Dollar Sinks Against Major Currencies : Concerns Over U.S. Economy Cited; Gold Up

April 12, 1985|Associated Press

NEW YORK — The dollar plunged against major foreign currencies in fairly heavy trading Thursday as investors continued to lose confidence in the U.S. economy.

Gold prices rose. Bullion was bid at $332.25 an ounce in late trading at Republic National Bank in New York, up $6.25 from Wednesday.

The Federal Reserve Board said its measure of the dollar against 10 major currencies dropped 2%.

Since reaching an all-time high on Feb. 25, the dollar now has fallen 10.1%. However, the dollar remains 72.6% above the depressed levels of the start of the 1980s.

"We've had quite a sell-off," said William Orsini, a dealer on the New York trading desk of the Bank of Montreal. "It's been not just one thing. It's been several things that have come out."

A Commerce Department report Thursday that retail sales fell 1.9% in March reinforced market sentiment that the American economic recovery was faltering, traders said. Many of them had expected a modest increase or, at least, flat sales.

Volcker Comment

That news came on the heels of Federal Reserve Chairman Paul A. Volcker's comment Tuesday that lagging industrial production could hinder the recovery.

"He didn't mention the word recession, but some people have read that into that," Orsini said.

The U.S. economic boom has been a major factor in the dollar's rise during the last several years.

Accelerating the dollar's sharp decline Thursday were lower interest rates, which make dollar-denominated investments less attractive.

"We have seen interest rates come off very strongly," Orsini said.

Orsini also cited the recent collapse of the unregulated government securities firm of Bevill, Bresler & Schulman Asset Management, Livingston, N.J., which is trying to reorganize under federal bankruptcy laws.

"It adds to the overall atmosphere of a nervous market," he said.

The dollar fell by more than 3 cents against the British pound in New York. The pound brought $1.2570 versus $1.22025. In Europe, it closed at $1.2455, compared to Wednesday's $1.2225.

Earlier, in Tokyo, the dollar closed at 253.90 Japanese yen, down from 254.90 yen Wednesday. Later, in London, the dollar was quoted at 251.95 yen.

Gold Closes Up

Other late London dollar rates, compared to Wednesday, were: 3.0790 West German marks, down from 3.1220; 2.5980 Swiss francs, down from 2.6505; 9.4000 French francs, down from 9.5500; 3.4845 Dutch guilders, down from 3.5375; 1,972.50 Italian lire, down from 2,004.00, and 1.3665 Canadian dollars, down from 1.3710.

New York dollar rates as of 4 p.m., compared to Wednesday, were: 3.0560 West German marks, down from 3.1240; 250.85 Japanese yen, down from 254.15; 2.5730 Swiss francs, down from 2.6450; 1.3650 Canadian dollars, down from 1.3727, and 9.3400 French francs, down from 9.5250.

Gold prices rose in response to the dollar's decline, bullion dealers said.

On the Commodity Exchange in New York, gold for current delivery closed at $332.70, up $6.50.

Gold in Hong Kong closed at $328.57 bid, up $5.43.

Later, in London, gold was quoted at a late bid of $331.00 an ounce, up from $326.50 on Wednesday.

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