CURRENCY : Dollar Stable in Quiet Holiday Trading

L.A. Times Archives

Dec. 31, 1987 12 AM PT

From Staff and Wire Reports

NEW YORK — The U.S. dollar closed mixed Wednesday in quiet holiday-week trading. Gold prices fell.

Republic National Bank of New York quoted a bid price for gold of $483.40 an ounce as of 4 p.m. EST, down $3.05 from $486.45 late Tuesday.

“The fear has gone out of the dollar market--a little yesterday, a little today--and it has stabilized,” said Bob Bannon, an analyst at Security Pacific National Bank in Los Angeles.

But like other analysts, he warned that “that isn’t going to last very long.”

White House spokesman Marlin Fitzwater said “the dollar was essentially stable yesterday and is drifting upward this (Wednesday) morning and in the overnight markets in Tokyo. So it seems to have stabilized. Our position remains the same, that we want stability in the dollar.”

Speaking with reporters in Palm Springs, where President Reagan is spending the New Years holiday, Fitzwater said: “We want to restate our position that we want stability. . . . We continue to watch it, to monitor the market forces at work. There are some actions that can and have been taken, obviously, actions that can always be taken in the future.”

But, he said, “we don’t want to speculate on whether we think any actions are necessary or whether we’d want to take them.”

Bannon said the stability was “only numerical” because too many traders were out of the market because of the year-end holidays. Once activity resumes in January, he said, new downward pressure on the U.S. currency probably will materialize.

Some Intervention

“People are starting to realize that while there’s a lot of lip service by the Group of Seven that it doesn’t want the dollar to go down any more, they’re also not willing to step up to the plate,” he said.

The Group of Seven--the United States, Japan, West Germany, Britain, France, Italy and Canada--issued a statement last week that promised unspecified steps to prevent further erosion of the U.S. currency.

On Tuesday and Wednesday, the dollar was bolstered by some central bank intervention, analysts said.

But it was “not in large amounts,” Bannon said. “There’s no firmness in what the central banks are doing.”

John Lynam, an analyst at Security Pacific’s New York office, also said the market is still bearish on the dollar and is not convinced that the Reagan Administration has any firm policy on where the currency should be.

While higher interest rates, which make U.S. securities more attractive to foreign investors, would bolster the dollar, “there’s a sense they won’t raise interest rates in an election year,” Lynam said.

“That leaves the Federal Reserve Board and the central banks to intervene. But they can’t do that forever,” he said.

New York Rates

“They’ve been doing it all week and the dollar hasn’t rebounded significantly,” he added. “So once the market gets back to full force, the dollar is going to go down.”

In Japan, the dollar remained at Tuesday’s 123.50 yen level. In London late Wednesday, the dollar was trading at 123.52 yen. Later in New York, the dollar stood at 123.32 yen, down from 123.45.

One British pound cost $1.8565 in London late Wednesday, nearly half a cent cheaper than late Tuesday’s $1.8610. In New York, a pound cost $1.8582, cheaper than the $1.8606 of Tuesday.

Other late New York rates for the dollar, compared to late Tuesday, were: 1.5950 West German marks, up from 1.5940; 1.2905 Swiss francs, up from 1.2885; 5.3995 French francs, down from 5.4035; 1,176.50 Italian lire, down from 1,177.50, and 1.3020 Canadian dollars, down from 1.3053.

Other late European rates for the dollar, compared to late Tuesday, were: 1.5955 West German marks, unchanged; 1.2920 Swiss francs, up from 1.2885; 5.4125 French francs, up from 5.4025; 1.7945 Dutch guilders, down from 1.7965; 1,178.50 Italian lire, up from 1,176.00, and 1.3048 Canadian dollars, up from 1.3045.

At the New York Commodity Exchange, gold closed at $482.70 an ounce, down $3.40 from $486.10 Tuesday.

Earlier in London, gold closed at $484 an ounce, down from $486. In Zurich, gold closed at $484.50, down from $487.50. Dealers in Europe said trading was thin, with declines due mainly to technical factors.

Hong Kong gold closed earlier at $487.34, down from $488.84.

Silver bullion traded late in London at $6.67 bid an ounce, down from $6.76. At the Comex, it closed at $6.617, up from $6.713 Tuesday.

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