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DOLLAR POSTS A SOLID GAIN AGAINST THE GERMAN MARK

SHARE DOLLAR POSTS A SOLID GAIN AGAINST THE GERMAN MARK

The dollar surged Friday, posting one of the biggest single-day gains of the year against the German mark, on the strength of solid rallies in American stocks and bonds.

The advance on Wall Street came after the government reported weaker-than-expected data on the economy that eased fears of inflation, creating a big investor appetite for dollar-denominated securities.Many currency dealers had incorrectly bet the economic data would show a stronger economy. When that gamble proved wrong, they scrambled to buy dollars to cover their bets. That created more demand for dollars and drove the currency's value higher.

Still, some analysts remained skeptical that Friday's advance signaled a reversal of the weakness in the dollar that has persisted for much of the year.

Gold prices were steady in domestic trading after falling overseas. On New York's Commodity Exchange, gold for current delivery settled at $383.30 per troy ounce, unchanged.

The dollar rally was touched off by an early surge in the Treasury bond market, where inflation-sensitive news often is felt first. The Commerce Department said the economy grew at a 3.8 percent annual rate in the second quarter, a slight upward revision from 3.7 percent initally estimated. Bond traders expected 4 percent growth or higher.

Sales and other data in the GDP report indicated that inflation is low, reducing the liklihood that the Fed will raise interest rates soon.

As the day wore on, the dollar's momentum took on a life of its own, dealers said.

In late New York trading, the dollar was quoted at 1.5745 German marks, up more than 2 percent from 1.5430 late Thursday. In London, the dollar fetched 1.5655 marks, up from 1.5475.

The dollar also was changing hands in New York at 100.46 Japanese yen, up from 99.71 and the highest level since Aug. 8. In London, the dollar rose to 100.35 yen from 99.70.

Other late dollar rates in New York compared with late Thursday: 1.3310 Swiss francs, up from 1.3030; 5.3920 French francs, up from 5.2885; 1,593 Italian lire, up from 1,565; and 1.3696 Canadian dollars, down from 1.3720.

The British pound fell to $1.5315 from $1.5560. In London, the pound was quoted at $1.5360, down from $1.5537.