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Dollar rise against

leading currencies

NEW YORK: The dollar rose against most leading currencies on prospects that interest rates will drop in Germany while remaining steady in the United States on Tuesday.

"There is a big concentration on the interest rate differential between the United States and Germany," said Dave Glowacki, senior trader at NBD Bank in Detroit. "People are hoping it will point to some purchases of U.S. assets."

At the close, the dollar was at 1.4770/75 marks, up from the open's 1.4670/75 marks. It was also higher at 98.05/15 yen from late Monday's 97.39/44 yen.

The dollar rose after Hans-Juergen Koebnick, president of the Bundesbank in Rheinland-Palatinate state, was quoted in a German newspaper as saying German interest rates still have room to ease.

"In very quite and thin markets, a little bit talk went a long way in helping the dollar stay well bid on the day," said Bob Near, vice president at Bank of New York.

A growing number of people expect the Bundesbank to trim its securities repurchase rate on Wednesday from the current 4.39 percent, after it surprisingly cut its official discount rate by half a point to 3.5 percent last Thursday.

Meanwhile, a wire service report said Federal Reserve sources suggested that U.S. monetary policy makers have confidence in the economy and are content to leave rates unchanged unless they see signs that demand will slacken.

"Right now, it looks quite good for the U.S.," said NBD's Glowacki. "The economy is moving along at a fairly good pace with no inflation pressures."

Traders were heartened earlier after U.S. economic data showed that the housing sector was rebounding from first-half weakness and that it appeared consumers did not lose heart during a second quarter slump in economic growth.

U.S. new home sales rose to 715,000 in July versus a revised 712,000 in June. Economists had forecast 712,000 home sales in July. Meanwhile, the consumer confidence index for August was 101.0 versus expectations for 100.5.

Traders said the market is now looking to the U.S. employment report due out Friday for direction.

The dollar also gained ground against the yen as market players sold the Japanese currency for both dollars and marks.

"There is a lot going on in Japan right now and people don't want to get caught sitting on the sidelines if something happens," said Belal Khan, senior dealer at Bank of Tokyo.

"Going short yen is the trade that has worked in the recent past," added Khan.

The dollar stood at 1.2165/70 Swiss francs, up from 1.2080/85 Swiss at the open, and at Canadian $1.3404/09, from C$1.3420/25.

Sterling closed at $1.5430/40, down from $1.5490/00 at the open, while the Australian dollar stood at $0.7540/50.

At midday, the Morgan Guaranty trade-weighted index stood at 94.1, from 93.6 on Monday.-Reuter