Dollar Gains on Rise In Key Indicator; Gold Declines 50 Cents --- A Wall Street Journal News Roundup
The U.S. dollar strengthened against major foreign currencies yesterday, partly in response to the larger-than-expected rise of 0.7% in February's U.S. leading indicators.</br></br>Gold declined 50 cents an ounce in trading that was cut short by a New York snowstorm.</br></br>Foreign-exchange traders said the February rise in U.S. leading indicators -- which suggest rapid economic growth in the months ahead -- more than offset the almost simultaneous announcement that the U.S. merchandise trade deficit last month widened to a record $10.09 billion. "The fact that the leading indicators figure came out at about the same time as the trade deficit tended to blunt the effect of the latter," said Barry M. Wainstein, a vice president of BankAmerica International, New York.</br></br>Although the foreign-exchange market had generally been expecting a smaller February trade deficit, said Bruce Pflaum, an assistant vice president and principal dealer of First National Bank of Chicago, "a few people had warned that the deficit could reach to between $10 billion and $11 billion, so the market wasn't all that surprised by the number. But the rise in February's leading indicators was more than almost anyone had expected." The general market expectation had been that the February U.S. leading indicators would advance by 0.2% to 0.4%.</br></br>Both Mr. Pflaum and Mr. Wainstein also said traders purchased dollars yesterday to cover short positions. Those short positions stemmed from dollar sales on Wednesday that brought the U.S. currency down to 2.5713 West German marks in late New York trading that day.