NEW YORK — The dollar began the year Tuesday by skidding lower, largely because of pessimism about the U.S. trade deficit.
Various factors were behind the dollar's decline, but most pointed to concerns about trade, analysts said.
Jack Barbanel, an analyst with Gruntal & Co., said the dollar was affected by comments by West German officials that the U.S. currency had reached its peak against the mark.
Barbanel said the remarks led traders to believe that "the dollar was getting too strong too fast" and therefore set off selling.
Effect of Trade Surplus
He said financial markets--including foreign exchange traders--also wanted to send a message to the incoming Bush Administration that the problems of the U.S. budget and trade deficits must be dealt with.
Jim McGroarty, a vice president with Discount Corp., said news of an increase in the West German trade surplus also fueled the dollar's decline.
The U.S. government has seen a lower dollar as a means of reducing the U.S. trade deficit, so increases in the trade surpluses of other countries are taken by the markets as portending a drop in the dollar.
The dollar also fell now that traders have completed their year-end position squaring, Barbanel said.
The U.S. currency started its day on a down note overseas and continued to fall in New York before regaining some ground. Barbanel attributed the late buying to technical market factors.
In London, where bank base lending rates are at a high 13%, a government assurance that the rate would be kept high to combat inflation drove the British pound up more than 2 cents.
One pound cost $1.8270 in London late Tuesday, up from Friday's late $1.8062, the last trading day before the New Year's holiday. In New York, the pound rose to $1.8225 from late Friday's $1.8115.
Other late dollar rates in New York, compared to late Friday's prices, included: 1.7670 West German marks, down from 1.7700; 1.49075 Swiss francs, down from 1.4995; 6.0340 French francs, down from 6.0480; 1,300.50 Italian lire, down from 1,306.00, and 1.19165 Canadian dollars, down from 1.19245.
Other late dollar rates in Europe, compared to Friday's late rates, included: 1.7620 West German marks, down from 1.7725; 1.4912 Swiss francs, down from 1.5025; 6.0125 French francs, down from 6.0600; 1.9870 Dutch guilders, down from 2.0020; 1,295.75 Italian lire, down from 1,305.25, and 1.1900 Canadian dollars, down from 1.1927.
Tokyo markets were closed for an extended New Year's holiday. The dollar traded early in London at 123.80 Japanese yen and was lower late in the day at 123.50 yen. In New York, the dollar fell to 123.825 yen from late Friday's 124.95.
Gold prices were marginally higher.
Republic National Bank of New York quoted a late bid of $411 an ounce, up from $410 late Friday. On the Commodity Exchange in New York, gold rose to $410.80 from $410 on Friday.
Silver prices were mixed, slipping in New York after rising in London. Silver closed at $6.023 on the Commodity Exchange, down from $6.038 on Friday. In earlier London trading, the metal was quoted at a bid $6.07 an ounce, up from late Friday's $6.04.