The dollar continued to decline sharply in Europe early yesterday, but later recovered part of its losses and actually showed a small gain against the Japanese yen.

Authoritative sources indicated that European banks and the Federal Reserve Bank in New York intervened aggressively for the second day in a row in conformity with an American-German-Swiss-Japanese agreement on Nov. 1 to support the dollar.

Officials here also indicated that they expected further "fluctuations" in the international value of the dollar as a result of the anxieties created by the oil cartel's projected 14.5 percent increase in prices next year.

But American officials made clear they were determined to prevent "a one-way psychology," similar to the anti-dollar sentiment that prevailed prior to Nov. 1, from reasserting itself That implies continued intervention, if necessary, on a heavy scale.

In Frankfurt, the Bundesbank, which had bought $48 million Monday, purchased another $60 million yesterday. As a result, the dollar closed at 1.8403 West German marks, up from 1.8390 marks earlier yesterday, but still below Monday's rate of 1.8592 marks.

The dollar was also down in Zurich, Paris, Milan and Amsterdam. It ended the day in London at $2.01 to the pound sterling, down a fraction. In Toyko, however, the dollar was up marginally from 193.325 yen on Monday to 193.35 yesterday on the strength of an intervention by the Bank of Japan which bought between $5 and $10 million.

At the clos of trading, the dollar was down, compared to last Friday's price before the OPEC announcement, by 2.6 per cent against the German mark; by 2.5 per cent against the Swiss franc; and 1.1 per cent against the Japanese yen.

Gold was up more than $7 an ounce in both London and Zurich markets, closing at $22.35 in London.

Meanwhile, administration officials were not particularly disturbed by a $722 million increase in the thirdquarter current account deficit to $3.8 billion on a seasonally unadjusted basis.

The current account measures the trade deficit as reduced by the U.S. surplus on services and other "invisible" items. It is considered the best measure of a country's position in its international accounts.

For the firs three quarters of 1978, the cumulative current account deficit now stands at $13.8 billion, and government officials have estimated it will hit between $17 billion and $19 billion for the full year, well above 1977's $15.3 billion.

Officials said they still believe the 1978 current account deficit will be in that range. But where they had been anticipating a decline in the current account deficit to about $6 billion next year, they now put the probable figure at $9.0 to $9.5 billion because of the increased cost of imported oil.

Similarly, against the earlier assumption that this year's expected trade deficit of about $35 billion might be shaved to $25 billion next year, the guess in informed circles yesterday was that the trade deficit now will be about $28 billion in 1979

All of these figures assume that the growth of real gloss national product will avenge 3.2 percent for the year. But officials also pointed out that if growth is slower than that in 1979, the trade and current account deficits may be a bit lower because imports would be expected to trail off a bit.

In other Commerce Department said that U.S. assets abroad increased $11 billion in the third quarter compared with $6.1 billion in the second quarter.

The Federal Reserve Board signalled a further tightening of interest rates at yesterday's meeting in New York of the Federal Open Market Committee. The signal prompted predictions from market analysts that the central bank soon may raise the discount rate to 10 percent or more.