U.S Currency Closes Lower; Gold Gains $1.90 --- Dollar's Decline is Checked By Latest Figures on M1 And Housing Starts
The U.S. dollar eased against major foreign currencies yesterday but the decline was checked by the release of U.S. economic reports that traders viewed as encouraging for the American unit.</br></br>Gold rose $1.90 an ounce in response to the dollar's continued weakness and rising demand.</br></br>The dollar lost quite a bit of ground in early New York trading on the West German mark's increasing strength, but Paul Steinborn, an assistant vice president of Credit Suisse, New York, said it bounced back up in later trading as a result of the disclosure that January U.S. housing starts had risen 15% from December.</br></br>The increase in housing starts "was a surprisingly good number, providing further evidence that the first-quarter economic growth is going to be strong and that interest rates are going to remain firm," said Barry M. Wainstein, a vice president of BankAmerica International, New York.</br></br>The disclosure that M1, the basic U.S. money-supply measure, had risen $2.5 billion in the week ended Feb.6 suggested that U.S. interest rates may remain firm. "The average market expectation had been that M1 would rise by only $1.8 billion," said Christine Noyer, an assistant secretary of Irving Trust Co., New York. The higher figure suggests that the Federal Reserve isn't about to ease credit conditions, which could have led to lower U.S. interest rates. High U.S. interest rates help the dollar by making dollar-denominated investments look especially attractive.