Newspaper article THE JOURNAL RECORD

Dollar Declines against Major Currencies; Gold Unchanged

Newspaper article THE JOURNAL RECORD

Dollar Declines against Major Currencies; Gold Unchanged

Article excerpt

NEW YORK (AP) - The U.S. dollar tumbled against major foreign currencies except the Canadian dollar on Thursday, as traders renewed speculation that U.S. interest rates could move lower.

Gold prices were mixed. At 4 p.m. EDT, gold bullion was quoted at $341.50 a troy ounce at Republic National Bank, unchanged from Wednesday.

Fueling the dollar selloff were comments by Federal Reserve Board Chairman Paul Volcker to the effect that ""people were misconstruing the idea that he was standing in the way of lower interest rates,'' said Howard Kurz, chief trader at the Bank of America's New York Trading Center.

Speaking before a House Banking subcommittee, Volcker warned that the end of the oil price decline might spark a new round of inflation, but denied he was trying to signal a tighter monetary policy. He also said that the United States would not necessarily wait for West Germany or other nations to move first before cutting the U.S. discount rate.

The discount rate is the interest charged by the Fed on loans to commercial banks, and a cut in the rate generally leads to reduction in a wide range of other interest rates.

""People took it that he (Volcker) was giving up on the fight against inflation,'' Kurz said, adding that ""selling started coming in a real flurry'' soon after reports of Volcker's comments hit the market.

Lower interest rates make U.S. securities less attractive to investors from other countries, thereby dampening demand for dollars and driving its value lower against other currencies.

In Europe, dealers said the dollar also was depressed by U.S. Treasury Secretary James A. Baker III's refusal Wednesday to comment on exchange rates ""unless there was a specific reason to do so.''

U.S. analysts and currency dealers said there were indications that the Federal Reserve intervened in the market to support the dollar against the yen, presumably in behalf of the Bank of Japan. …

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