Newspaper article THE JOURNAL RECORD

Dollar Falls Sharply, Gold Prices Increase

Newspaper article THE JOURNAL RECORD

Dollar Falls Sharply, Gold Prices Increase

Article excerpt

NEW YORK (AP) - The dollar, undermined by expectations of lower interest rates, fell sharply against major foreign currencies in quiet trading on Monday.

Gold prices rose. Bullion was quoted at $345.75 an ounce at 4 p.m. EDT at Republic National Bank in New York, up $1 from Friday's late bid.

The dollar, which shed about 2 Japanese yen, fell below several key support levels, dealers said. That triggered more selling, they said.

There was added speculation that the Federal Reserve Board soon would cut its discount rate - what it charges member banks for loans - to spur the economy, dealers said.

It followed the Commerce Department's report early in the day that new home sales fell 11.6 percent in May for the biggest decline in more than two years.

""That was much larger than anybody anticipated. It added more fuel to the fire,'' said Jeff Mondschein, vice president at Merrill Lynch Capital Markets.

Peter Wild, vice president at Bank Julius Baer & Co., said: ""People feel more and more that interest rates will be cut in this country because of the sluggish economy.''

Lower interest rates make dollar-denominated investments less attractive.

The housing report came on top of another Commerce Department report on Friday of a higher-than-expected U.S. trade deficit last month.

On Monday, the absence of central bank intervention here also contributed to the dollar's decline, Wild said.

So did the thin trading at the end of the month, the end of the quarter and ahead of the the Fourth of July holiday, dealers said.

Mondschein said: "The question is whether the bearish sentiment continues and we get a much lower dollar ...or whether it's an overly bearish dollar in a thin market.''

But Wild said the government is scheduled to release more economic statistics in the next several says, and if they signal further sluggishness, the Fed will cut the discount rate next week. …

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