Jitters and Glitters

Money jitters are back again. In the banking centers of Western Europe currency values are swinging up and down more sharply than they have in months. None is being bounced around more than the dollar, which is being victimized by exaggerated perceptions of the U.S.'s economic problems, by fluctuations in interest rates and the fickle peregrinations of Middle East oil billions. At one point in the course of some fast and furious trading last week, the greenback was down nearly 14% against the Swiss franc and more than 8% against the West German mark from where it was only two months ago.

The dollar has been damaged by the drumbeat of increasingly grim economic news from the U.S. In addition, because short-term interest rates in the U.S. are coming down from their recent record peaks, money managers are switching funds out of dollars and into currencies offering better returns, notably the mark. While New York banks pay 8%% interest on short-term dollar deposits, German banks give up to 9% for marks.

The dollar has also lost some of its zing because of a policy switch by the oil-producing countries. Until recently, the oil nations received and invested nearly all of their oil revenues in dollars and British pounds; lately, they have begun to spread out and funnel more of their receipts into other currencies, notably the Swiss franc. Alarmed at a sudden and disruptive surge in demand for Swiss francs from nervous outsiders eager to unload dollar holdings, the Berne government took steps to stop the surge. Nonresident foreigners will have to pay 3% quarterly penalties on new bank deposits of more than 50,000 Swiss francs.

Actually, many European moneymen argue that the dollar is down more than it should be, given the fact that the U.S. economy is in fundamentally better shape than Western Europe's. Says one knowing Swiss banker: "The dollar is obviously undervalued now."

The dollar's dive has contributed to another upward leap in gold. Free-market prices have been steadily climbing, partly because speculators are betting that Americans will invest heavily in bullion when it becomes legal to do so on Jan. 1, and the latest flurry of concern over the dollar has given added glitter to gold. Early last week the price on the London exchange hit a record $190.25 per oz.--up from $150 only two months ago--before settling down at week's end to $182.

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