Newspaper article THE JOURNAL RECORD

Dollar Down; Gold Mixed

Newspaper article THE JOURNAL RECORD

Dollar Down; Gold Mixed

Article excerpt

NEW YORK (AP) - The dollar fell sharply in hectic trading Thursday following interest rate hikes by West Germany's central bank.

Gold prices were mixed. Republic National Bank of New York said gold was bid at $385.25 an ounce as of 4 p.m. EDT, up from $382.80 late Wednesday.

Currency markets in Europe and at home were stirred by the surprise announcement that the Bundesbank had raised key interest rates by half a percentage point. The central bank said it acted to curb high monetary growth, which fuels inflation.

The Dutch and Austrian central banks followed the Bundesbank with interest rate hikes of their own.

Trading was ``rocky,'' said Curtis Perkins, a dealer at Chemical New York Capital Markets Group. ``The announcement came and whamo, the dollar immediately dropped.''

Although traders had been speculating about foreign rate hikes for the past few weeks, Perkins noted that the timing of the Bundesbank announcement was unsettling.

Analysts said that in addition to wanting to stem inflationary momentum, the West Germans increased rates to prevent capital from flowing to Switzerland, which recently increased its key interest rates.

Concern is brewing that Britain and-or Japan may follow suit, which would put further pressure on the dollar as well as the U.S. economy, said Jack Barbanel, a senior vice president at Gruntal & Co.

``Money will move to those currencies where (interest rate) yield is the highest and where there is greatest economic stability,'' Barbanel said.

While interest rate differentials still slightly favor the dollar, ``our currency gets weaker on the possibility of an economic slowdown here,'' he added. …

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