Treasury officials, cheered by the response to Tuesday's move to bolster the dollar by accelerating sales from the U.S. gold stock, yesterday were studying additional actions designed to convince the market that the U.S. does in fact care about the international value of the dollar.
The dollar rose against the Japanese yen and European currencies, while gold plunged below $200 an ounce for the first time in almost a month, before recovering slightly.
An additional big boost for the dollar was attributed to a statement by Crown Prince Fahd of Saudi Arabia to the effect that oil would continue to be priced in the U.S. currency, and not, as often rumored in a "basket" of other currencies.
Additional gold sales were the second step of a series of actions promised by President Carter last week to support by ailing dollar. The first was an increase in the Federal Reserve discount rate from 7 1/4 to 7 3/4 per cent.
Both steps may have more psychological than real effect, but they were welcomed by foreign exchange markets as evidence of the Carter administration's willingness to stabilize the dollar if it can do so.
Former Fed Chairman Arthur F. Burns, in a valedictory statement last March, had urged the U.S. not only to put all of its gold stock on the line, but to sell for foreign currencies, as well as dollars.
The Treasury announcement Tuesday was for a limited sale, with payment only in dollars. But officials point out that if foreigners buy dollars to purchase gold, they have to sell other currencies. If they have dollars, they can be used directly. In either case, the gold sale absorbs some of the excess dollar supply, and has the collateral benefit, from the U.S. point of view, of depressing gold prices.
Treasury official could change their mind and later sell some gold directly for other currencies. But they flatly rule out selling gold to central banks or governments because that would once again enhance the monetary role of gold.
The next step in the dollar-support process could be an announcement that the United States will borrow hard currencies, especially German deutschemarks, from the International Monetary Fund. The U.S. has a creditor position of almost $4.5 billion in the IMF, meaning that it can draw that amount without any conditions.
The purpose of such an IMF drawing would be to add to the stockpile of hard currencies that can be used by the United States to intervene in foreign exchange markets whenever the U.S. decides that movements are so erratic that they can be termed "disorderly."
European officials have persistently urged the U.S. to use more of its resources for intervention, and the U.S. has just as steadily refused to follow a massive intervention policy, or to "peg" any given rate of the dollar.
But the Carter administration is not averse to demonstrating to the markets that it can marshal large resources for intervention. Federal Reserve Chairman G. William Miller agrees that the U.S. intervention policy could be made more "credible."
Meanwhile, however, reports in the New York market that the Fed had intervened in the exchange markets on Tuesday could not be confirmed here.
The doubling of the volume of the Treasury's monthly gold sales could result in auctions of about 3.3 million ounces by February, 1979, out of the U.S. gold stock of about 278 million ounces. The $600-million plus revenue would have only a small effect on the $31 billion trade deficit, and by itself is not calculated to shift exchange rates much.
But the markets yesterday liked the idea. The dollar rose to more than 192 yen, to about 2.01 German marks, and to 1.663 Swiss francs. The British pound, which at one time last week was up to $2, slid back to $1.9255. These prices were less than the day's best.
Not surprisingly, the widest movements of the day were in gold, which had closed Tuesday at $206.25 in London. But after the Treasury gold announcement, it plunged below $200, then wound up at $201,05, off more than $5 an ounce.
Experts here doubt that the Treasury action will be a long-term depresant of the price of gold, for which industrial as well as speculative demand has increased. "But the knowledge that the Treasury can not only continue the sales, but further increase the volume, might keep gold prices from rising too much," one close follower of the gold market said.
Prince Fahd's expression of confidence in the dollar came in an interview with the newspaper Al-Siyassa.