The dollar rose against most major currencies Friday, with the Japanese yen weakening following a report that the government might cut a key interest rate to spur the country's slack economy.
Gold prices also rose. On the New York Commodity Exchange, gold for current delivery closed at $387.40 a troy ounce, up $1.40 from Wednesday. At 4 p.m. EST, Republic National Bank of New York quoted gold at $387.10 a troy ounce, up $1.60.Amy Smith, a market strategist with IDEA analytical services, said the market reacted to a Japanese wire service report quoting a member of the ruling coalition suggesting the Bank of Japan cut its discount lending rate to 0.5 percent, from 1.75 percent. She said this was tantamount to the government calling for the cut.
"It's just a matter of when," Smith said. "I do think they'll cut it."
A cut in interest rates generally decreases demand for a currency as traders seek a higher return elsewhere. That drives down the currency's price.
In New York, the dollar closed at 110.18 yen, up from 110.10 yen Thursday. In London, the dollar was quoted at 110.15 yen. Earlier in Tokyo, the dollar closed at 109.84 yen, down 0.03 yen from Thursday's close.
Traders also sold yen against the German mark, Smith said, helping to further weaken the yen and the dollar.
"When they buy marks it has a depressing effect on dollar-mark" because traders have to sell dollars to buy the marks, Smith said.
The dollar fell to 1.7085 marks in New York, down from 1.7090 Thursday. In Europe, the dollar fell to 1.7045 German marks, down from 1.7085.
Smith also said the Canadian dollar suffered when Standard & Poor's rating service said it was downgrading the credit ratings on three provinces.
The Canadian dollar already was weakening because of falling interest rates, she said.
The U.S. dollar rose to 1.3403 Canadian dollars in New York, from 1.3338 Thursday. Earlier in London, the dollar rose to 1.3383 Canadian dollars, up from 1.3315.
In London, the British pound rose to $1.4915 from $1.4820 late Thursday. In New York, the pound fetched $1.4865, less expensive than $1.4880 Thursday.
Other late dollar rates in New York as of 4 p.m. EST, compared with late Thursday, included: 1.4605 Swiss francs, up from 1.4595; 5.8380 French francs, down from 5.8385; 1,688.00 Italian lire, unchanged from Thursday.
Other late dollar rates in Europe, compared with late Thursday: 1.4545 Swiss francs, down from 1.4585; 5.8265 French francs, down from 5.8407; 1.9090 Dutch guilders, down from 1.9126; 1,685.00 Italian lire, down from 1,687.00.
On the New York Comex, silver for spot delivery closed at $5.017 a troy ounce, up from $5.012 an ounce Thursday.