U.S. Dollar Rises After Forecast Of Higher Rates
The U.S. dollar strengthened against major foreign currencies yesterday following a prediction by Salomon Brothers' chief economist, Henry Kaufman, that U.S. interest rates will rise further by year end.</br></br>Gold rose $1.10 an ounce in light trading.</br></br>The dollar gained even though U.S. interest rates actually eased throughout the day. Mr. Kaufman told a news conference in Detroit that he expected the prime rate to rise to between 13% and 13 1/2% by the end of 1984.</br></br>The prime rate, which U.S. banks use as a base for setting interest rates on corporate loans, was boosted just last week to 12% from 11 1/2%, setting off a broad-based rise in the dollar. High U.S. interest rates help the U.S. currency by making dollar-denominated investments more attractive.</br></br>As soon as Mr. Kaufman spoke, said David Wilson, a foreign-exchange trader at Bank of Montreal in New York, "the dollar began to strengthen." Before that, the dollar had eased in Europe and in early-morning trading in New York from its Friday levels. "Sometimes Kaufman's an excuse for not thinking," Mr. Wilson added, meaning that the economist's prediction had a strong impact because there wasn't any other news affecting the market.