The dollar tumbled against foreign currencies today on a drop in U.S. interest rates, but dealers said the retreat was orderly. The British pound was up almost 3 cents on the day. Gold rose.
The dollar's decline came after yields on U.S. Treasury securities fell sharply Friday, when unemployment figures gave evidence of a decided slowing in the U.S. economy and other data released by the Federal Reserve indicated that it had not tightened up on interest rates.
Milan dealers said there also still was fear that central banks might take action against the dollar.
Late Friday, an official at the Federal Reserve Bank of New York acknowledged that the Fed had participated in the massive intervention during the last week of February that sent the dollar plummeting.
"I cannot comment on particulars, but I will say that there was concerted intervention and the U.S. participated in it," Sam Y. Cross, the New York Fed's executive vice president in charge of foreign exchange operations, said at a news conference releasing the Fed's semiannual report on foreign exchange operations.
The West German mark, the benchmark trading currency, also got a boost to the detriment of the dollar when the Socialists did not do as well as had been feared in local elections in Germany.
The dollar traded from almost 3.40 German marks Friday to close today near the lows of 3.3250 in New York. Dealers said the decline began in the Far East overnight and was gradual throughout the day, with no great selling pressure and good two-way trading.
Gold and bullion dealers said today's announcement of the death of Soviet leader Konstantin Chernenko and the transfer of power to Mikhail S. Gorbachev had little effect on markets.
In the past, the death of a major world leader and concern over a successor have sent the dollar and gold rising under their traditional roles as havens for funds in times of uncertainty.
Ronald Holzer, chief currency dealer at Harris Trust & Savings Bank in Chicago, said there was no such unease in markets today because traders were long aware that Chernenko was ill and because the two previous changes in Soviet leadership since 1982 had not been accompanied by a dramatic shift in policy.
In Tokyo overnight, the dollar fell to 260.25 yen from 261.65 Friday, and in New York it plunged to 258.93 from 260.96.
The British pound benefited from the dollar's decline, and dealers said there was good corporate demand to take advantage of high British interest rates.
In London, the pound rose to $1.0880 from $1.0693, and in New York, it was $1.0926, up from $1.0686.
The Canadian dollar bounced up to 72.25 U.S. cents from 71.63.
European closing dollar rates with late New York prices and comparable Friday rates in parentheses:
Frankfurt, 3.3582 marks, down from 3.3975 (3.325 vs. 3.398); Zurich, 2.858 Swiss francs, down from 2.89 (2.842 vs. 2.893); Milan, 2,097 lire, down from 2,135 (2,074.68 vs. 2,118.64); and Paris, 10.2345 francs, down from 10.3725 (10.173 vs. 10.373).
Gold rose slightly in New York on the dollar's decline and on a technical bounce from Friday's selling.
Gold closed unchanged in Zurich at $291.50 an ounce and it eased to $290.75 in London from $291.25.
Republic National Bank in New York closed cash gold at $289.50 an ounce, up from $287.75. The New York Commodity Exchange settled the March contract at $289.10, up from $287.30.
Republic closed silver at $5.51 an ounce, down from $5.60; the Comex settled it at $5.525, down from $5.592. Earlier in Zurich, silver was unchanged at $5.70 an ounce.