The Treasury announced last night that it will more than double the amount of gold it sells each month, in another attempt to shore up the dollar.
It was the second in a series of promised administration moves to strengthen the dollar in international money markets. Last week the Federal Reserve, the nation's central bank, raised interest rates to make investment here more attractive for foreigners.
For four months starting in November, the Treasury will sell 750,000 ounces of gold a month, up from 300,000 ounces. The government has been selling gold to the public since May.
A Treasury spokesman said the higher, rate of sales would help reduce the nation's trade deficit, by either reducing the need of U.S. users to import gold or increasing the amount of gold sold to foreigners.
Either way, it will reduce the number of dollars in circulation abroad.
The higher sales level will be reevaluated in February.
The Treasury said if the gold sales continued at the 750,000-ounce level for a year, they would help the balance of trade by $1.8 billion. If stopped after four months, the value would be about $600 million. Last year, imports exceeded exports by about $27 billion, and the trade deficit is expected to be about that size again this year.
Large trade deficits put more dollars into the hands of foreigners than they want, and that reduces the value of the dollar on international currency markets.
Because it then takes more dollars to buy a given amount of foreign currencies, prices go up on imported products such as Japanese automobiles.
The administration calculates that the sharp decline in the dollar this year has added at least a half a percentage point to the inflation rate.
Last week, the Federal Reserve Board raised the discount rate it charges on loans to member banks. That action, coupled with other Federal Reserve monetary policy moves, raises interest rate in the United States and encourages foreigners to invest here.
Last week, after a sharp plunge in the world price of the dollar, the White House promised a series of moves to keep the currency from declining further.
Yesterday foreign currency traders in New York said the central bank intervened twice in the exchange market to buy dollars to increase demand for the U.S. currency and undercut speculators who are betting the dollar will decline further.
Federal Reserve Board Chairman G. William Miller said Monday that there is a "long list" of things the government can do to aid the dollar, some of which are obvious (such as the increase in gold sales), "plus others we can't tell you about because we want to surprise you." Miler's statement was clearly aimed at increasing uneasiness among speculators against the dollar.
The dollar had a mixed performance in Europe yesterday and appreciated in value against the Japanese yen.