The dollar gained on most European money markets yesterday, buoyed by news of a tentative agreement that could end the U.S. coal strike and new Swiss government measures to halt speculation in the franc. Gold was mixed.
Gold dropped in Zurich from $184.125 an ounce to close at $181.125. It finished at the same rate in London, but was up from a weekend price of $180.375. Bullion dealers attributed selling pressure on gold to a steadier dollar.
The Swiss government and its central bank yesterday banned the purchase of Swiss securities by non-resident foreigners. The measure reinforced action taken last Friday when Switzerland imposed a negative interest commission of 40 percent annually on large Swiss franc deposits held in Switzerland by non-resident aliens.
The measure, along with imminent settlement of the long U.S. coal strike, resulted in a sharp rise for the dollar in New York Friday that was maintained in Europe yesterday.
In West Germany, three prominent monetary officials expressed renewed concern yesterday that the dollar is undervalued.
Economic Minister Otto Lambsdorff said in Frankfurt the psychological impact of the dollar's decline over the past five months could hinder world economic recovery.
In West Berlin, the president of the Bundesbank (West German central bank), Otto Emminger, said the dollar was undervalued by about 20 percent - far more than is justified by differences in real purchasing power.
And in Cologne, the vice president of the Bundesbank, Otto Poehl, said in a radio interview that the U.S. ought to borrow funds on the international capital market to finance its balance of payments deficit. So far, the deficit has been financed by purchases of dollars by foreign central banks, he said.
Some skepticism was expressed over the Swiss measures. "The Swiss central bank is in essence doing nothing," according to foreign exchange expert James Sinclair in New York.
Sinclair said that although Switzerland demonstrated an understanding of money as a commodity, it "failed to grasp the psychology of the money market. Switzerland's action to dissuade franc purchases will only act to make the currency more attractive."
He said action in banning purchase of Swiss securities "has historically resulted in a black arbitrage between Switzerland and Germany due to banking secrecy and lack of detailed customs inspection."
Emminger said he believes the dollar is undervalued by 20 percent, and he said no illusions should be held on the dollar's "swinging back to its real purchasing power."
The dollar had its sharpest gain against the Swiss franc yesterday, closing in Zurich at 1,88875 Swiss Francs compared with 1,7875 Friday. It rose to 1.89 in New York.
In Frankfurt the dollar rose to 2,0517 marks, from 2,0145 Friday.
In Brussels, the dollar went to 21,925 Belgian francs from 31.36; in Amsterdam, to 2.19040 guilders from 2.172
In Tokyo, where analysts said the impact of the Swiss measures and the settlement of the coal strike were overestimated, the dollar had a marginal gain to 238.30 yen from 233.01 Friday. However, the dollar rose to 239.20 in New York.
In Milan, the dollar eased to 854.25 lira from 857.30 Friday; and in Paris, to 4.7950 French francs from 4.82. In London, the pound gained to $1.9320 from $1.93.