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Greenback soars

against major units

NEW YORK: The dollar rose shaprly on Thursday against major currencies after a US government report showed inflationary pressures remain subdued.

The dollar also benefitted as the German mark came under pressure against weaker European currencies, especially the lira, which rose as Italy's central bank stepped in to buy lira and sell marks to bloster the Italian currency.

"We are seeing mark softness across the board," said Bob Lynch, currency analyst at MMS International. "As these currenices make nice comebacks, it benefits the dollar."

At the close, the dollar was at 1.4192/02 marks, up from 1.4107/12 marks at the open. It was at 92.82/85 yen, up from the open's 92.30/35 yen.

The dollar rally got going early in the session after the US Labor Department said the Producer Price Index held steady in July after dipping in June.

As the dollar rose on the upbeat economic news, traders said the rally accelerated when stop-loss orders kicked in.

Traders said that many had underestimated the demand for dollars, and when the currency rose, they were forced to change their bets and join in on the dollar-buying spree.

Many said the dollar's sharp move upward signals that the currency is poised for further gains.

The dollar was little moved by the US Treasury's auction of 30-year bonds, which attracted fairly strong bidding.

It was the third and final led of the government's record $42.5 billion quarterly refunding.

Though the dollar showed little immediate reaction to the results, analysts said, taken with a favourable 10-year and a "mediocre" three-year note sale earlier in the week, the outlook for the dollar is brighter.

"Overall, we had a really big day," said Bob Near, vice president at Bank of New York. "Taken together, the auctions this week were positive and I think it has given us legs to go even higher in the coming days."

The dollar's rally came despite some disappointment that Germany's Bundesbank left official interest rates unchanged at its council meeting.

At the close, the dollar was at 1.1760/70 Swiss francs, up from the open's 1.1665/70 Swiss.

It was at Canadian $1.3596/01 from C$1.3570/75. Sterling was at $1.5910/20 from $1.5970/80.

The Australian dollar closed at $0.7403/08. At midday, the Morgan Guaranty trade-weighted index stood at 91.9 percent of its 1990 trade-weighted value.-Reuter