U.S. dollar soars gold down

Press, 28 October 1981, Page 27

U.S. dollar soars gold down

PA London The U.S. dollar soared in value on European foreign exchanges yesterday because of rising tension in Poland and high. U.S. interest rates, but eased in later trading. Dealers in London said that the Bundesbank, West Germany’s central bank, persistently sold dollars throughout the afternoon to increase the supply of the U.S. currency, which climbed to more than 2.32 Marks at one stage. Dealers said profit-taking and the Bundesbank’s intervention caused some easing in the value of the dollar. But it was underpinned by the view that American interest rates would remain high because the U.S. Treasury was expected to raise between SBSOOM and S9OOOM in November to meet its needs. High interest rates in the U.S. encourage purchases of dollars for investment. Dealers said the main

reason for the dollar’s early surge was the news from Poland that troops had been sent to some areas to help move supplies. Trading between the dollar and the mark dominated market activity in London. Dealers said a split in the (coalition government of West Germany over the country’s budget had helped the dollar. The dispute in Bonn is over ways of dealing with an unexpected deficit of nearly DMBOOOM in the 1982 budget. The dollar’s rise was less steep against the British pound sterling, which closed at 1.8040 compared with 1.8202 yesterday. Sterling was helped by a sharp rise in short-term interest rates although it lost some ground gained early in the day against European currencies. The dollar’s strength depressed gold, Which was $425.75 an ounce at the end of trading in London, or nearly $5 down on Friday.