Originally created 07/04/97

Dollar finishes lower



NEW YORK (AP) - The dollar touched another 31/2 -year high against the mark Thursday before retreating to end mostly lower on surprisingly weak U.S. jobs data and selling ahead of the three-day July 4 weekend. The pound surged for the fourth straight day.

Traders said the British currency was likely to keep strengthening on the widening expectations that interest rates in Britain must rise, perhaps as early as the Bank of England's policy-making meeting next Thursday, to thwart inflationary pressure in the country's vibrant economy. Rising rates tend to enhance a currency's value.

"The big story is the pound," said Jan Alvarez, senior currency trader at Corestates Bank in Philadelphia. "Everybody's looking for higher rates in Britain. Everybody thinks the pound is a heck of a buy."

Demand for pounds intensified Wednesday after Britain's new Labor government unveiled a budget that was far less austere than expected. A strong rally in the British stock market Thursday further increased the appetite for sterling.

"Again the pound just took off today," said Robert Katz, senior foreign exchange trader at MTB Bank Corp. in New York. "Sterling just continues to outperform the other currencies."

The pound hit an intraday high of $1.6915, the highest since Jan. 10, before settling in New York at $1.6906, up from $1.6705 Wednesday and up nearly 3 cents for the week.

The pound also hit an intraday high of 2.9599 marks, the highest since May 1992 and its fourth straight intraday high vs. the German currency. The pound's broad strength indirectly muted the dollar's weakness against other currencies.

In intraday dealings the dollar reached 1.7567 marks, the strongest since February 1994 and the fourth straight day the dollar has reached a 31/2 -year high vs. the German currency, before falling to settle in New York at 1.7535 marks, down from 1.7536 Wednesday.

The dollar also finished below 114 yen for the first time in a week, settling at 113.80 yen in New York, down from 114.49.

The main force driving the dollar lower was the U.S. Labor Department's report on June employment, which showed the jobless rate rose to 5 percent after falling to 24-year lows of 4.8 percent in May and 4.9 percent in April. Forecasters had expected no change.

The data, coming one day after Federal Reserve policy-makers opted to leave interest rates unchanged, provided new evidence that the U.S. economy has slowed, further diminishing the prospects for rising interest rates in this country.

Traders used the report as an opportunity to sell dollars and secure profits from the currency's latest bout of strength vs. the mark. Many also wanted to reduce their bets on a higher dollar prior to the July 4 holiday, when U.S. markets are closed.

"It's a short week, it's a long weekend, and people didn't want to get too involved in carrying positions over the weekend," said Dennis Holman, vice president of foreign exchange at ABN-AMRO Bank NV in Chicago.

Other dollar rates in New York, compared with Wednesday: 1.4697 Swiss francs, down from 1.4700; 5.9055 French francs, up from 5.9040; 1,705.00 Italian lire, unchanged; 1.3730 Canadian dollars, down from 1.3774.