Newspaper article THE JOURNAL RECORD

Dollar Takes Dive; Gold Up Slightly

Newspaper article THE JOURNAL RECORD

Dollar Takes Dive; Gold Up Slightly

Article excerpt

NEW YORK (UPI) - The dollar plunged Thursday in reaction to a weaker than expected 1.3 percent first-quarter economic growth and dealers see little to support it in the immediate future. Gold rose slightly in sluggish trading.

The dollar tumbled from a New York opening of around 3.05 German marks to 2.96 in late afternoon and posted dramatic declines against other currencies.

Nearly all of the losses came within minutes after the government reported the nation's Gross National Product grew 1.3 percent in the first quarter, down from the weak 2.1 percent estimated in theGNP flash report and much lower than the most bearish projections.

Commerce Secretary Malcolm Baldrige said the sharpness of the dollar's recent decline ""could be dangerous'' to the U.S. economy in terms of higher interest rates and inflation. He said a 20 percent decline over two years would be helpful to U.S. trade but that such a drop in two months would be dangerous.

""Obviously it was the worst kind of number for the dollar,'' said Earl Johnson, vice president at Chicago's Harris Bank. ""Sentiment is decidedly bearish and a further decline is a possibility.''

The dollar's outlook was further depressed by a signal of lower interest rates. UMB Bank & Trust, a small New York bank, cut its prime rate to 10.25 percent from 10.5 percent.

But James McGroarty, vice president at Discount Corp. of New York, said it was noteworthy that the dollar stabilized after the initial selling spree. ""The perception we get from European investorsis that if interest rates stabilize and there are no further surprises in the financial markets the dollar at the 2.90s-mark level might be a good time to buy. …

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