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Money Supply Jump Spurs a Strong Dollar

May 31, 1985|Associated Press

NEW YORK — The dollar staged a late advance in listless trading Thursday, adding to its gains in after-hours dealing following a Federal Reserve Board report of an unexpectedly sharp rise in the basic U.S. money supply.

Gold prices were mixed in quiet trading on world bullion exchanges. Republic National Bank of New York said gold bullion was bid at $313 an ounce, down $2 from the late bid Wednesday.

Typical of the dollar's performance was its showing against the Japanese yen.

In Tokyo, where trading ends as Europe's business day begins, the dollar edged down to 251.63 Japanese yen from 251.70 yen Wednesday. Later in London, the dollar was quoted at 251.55 yen, but by the end of the trading day in the United States, the dollar had climbed to 251.825 yen from 251.515 yen late Wednesday.

Foreign currency dealers said the trading pace was unusually quiet Thursday, as senior traders began a convention in Toronto.

"The word when all the bosses left was 'don't do anything crazy.' " said Jeffrey Brummette, a trader at Irving Trust Co. in New York.

Sluggish Economy

With traders especially cautious about taking on new risks and with the normal slowdown in activity at month's end, each order that was placed wound up moving markets, he said.

Traders even shrugged off government reports that pointed to sluggish economic activity in the United States.

The Commerce Department said its index of leading economic indicators, the government's main economic barometer, fell 0.2% in April, the first decline this year. It also said sales of new single-family homes fell 12% last month.

Many analysts still expect a pickup in economic activity in the second half of this year.

Meanwhile, a Federal Reserve Board report late Thursday of a $4.5 billion surge in M1, the basic U.S. money supply, lowered expectations of further declines soon in American interest rates.

The British pound, which rose in London to $1.2745 from $1.2642 Wednesday, later slipped to $1.2740 in New York from $1.2770 late Wednesday.

Other late dollar rates in Europe, compared to late rates Wednesday, included: 3.0810 West German marks, down from 3.0890; 2.5940 Swiss francs, down from 2.6035; 9.3787 French francs, down from 9.4400; 3.4675 Dutch guilders, down from 3.4935; 1,965.50 Italian lire, down from 1,975.50, and 1.3760 Canadian dollars, down from 1.3815.

Dollar rates in New York following the release of the money supply report, compared to late rates Wednesday, included: 3.0855 West German marks, up from 3.0670; 2.6025 Swiss francs, up from 2.5800; 9.4050 French francs, up from 9.3400, and 1.3761 Canadian dollars, down from 1.3820.

Gold rose rose $3.20 in Hong Kong to close at a bid of $315.67 an ounce.

In Europe, gold fell $2.50 in London to a late bid of $314 an ounce, and gold rose $2 in Zurich to $314.50.

On New York's Commodity Exchange, gold bullion for June delivery fell $2.30 to close at $313.20 an ounce.

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