CURRENCY : Dollar Climbs in European Trading
FRANKFURT — The dollar traded Monday at its 1988 highs against West Germany’s mark and other foreign currencies, buoyed by speculation of a rise in U.S. interest rates.
Adding to the upward momentum in the dollar was an announcement Monday by French Finance Minister Pierre Beregovoy, who said France and West Germany have agreed that it is important to stabilize the dollar at current levels.
“We both desire monetary stability and we consider that it is important to stabilize the dollar at its current levels,†Beregovoy told journalists as he left a meeting of the Franco-German Economic Council. He did not elaborate.
Investors were betting that the U.S. Federal Reserve will raise its key discount rate to 6.5% from 6% to dampen inflationary pressures. Recent signs of a stronger U.S. economy have also supported the dollar.
Higher interest rates would make dollar assets more rewarding, hence the move to buy dollars.
In Europe’s morning session, the dollar moved higher in quiet trading. Markets were closed in Singapore, London and New York on Monday for national holidays, but dealings were active in Frankfurt.
The dollar rose almost to 1.73 West German marks before closing in Frankfurt at 1.7275.
The dollar rose nearly a cent against the British pound. It cost $1.8478 to buy one pound in Europe, cheaper than $1.8570 in London late Friday.
In Tokyo, where the business day ends before Europe’s begins, the dollar rose 0.34 yen to a closing 124.98 yen. Later in Europe, it was quoted lower at 124.08 yen.
Other late dollar rates in Europe, compared to late Friday, included: 1.7270 West German marks, up from 1.7140; 1.4415 Swiss francs, up from 1.4305; 5.8025 French francs, up from 5.7660; 1.9335 Dutch guilders, up from 1.9177; 1,280.00 Italian lire, up from 1,270.75, and 1.2378 Canadian dollars, down from 1.2407.
In Zurich the dollar ended at its highest closing level of the year, buoyed by speculation that the dollar may make further gains in the absence of central bank intervention to stem the rise, dealers said.
“Apparently many people think the way higher is clear after the banks failed to act when the dollar went over 1.71 marks,†a dealer with a major Swiss bank said.
Gold was unchanged in Zurich, closing at a bid $452.50. Earlier in Hong Kong, gold rose $1.94 to close at a bid $454.31.
Silver was quoted in Zurich on Monday at a bid price of $6.57 an ounce, down from Friday’s late bid of $6.59 in London.
In foreign stock markets, the key Tokyo Nikkei share index rose 260.60 points, or 0.97%, to end at 27,223.10.
Analyst Moriyasu Tahara of Schroder Securities in Tokyo said: “There will be consolidation until things in the United States became clearer. In the short term, there will be little direction.â€