CURRENCY : Dollar’s Rally in Europe Fizzles Out in N.Y. Trading

NEW YORK — A coordinated interest rate cut by three European nations spurred a brief rally in the dollar Tuesday, but the U.S. currency slipped back in domestic trading and finished lower against most major currencies.

Gold prices also were lower in New York trading. Republic National Bank of New York quoted a bid of $474.50 an ounce at 4 p.m. EST, down from $474.70 late Monday.

Analysts said a mild surge of bullish sentiment, unleashed by news of the interest rate cuts, dissipated over the course of the afternoon as nagging doubts about the U.S. budget deficit resurfaced.

The dollar’s erosion quickened in response to reports that a West German central banker had criticized the budget accord reached last week in Washington.

Hans Wertz of the Bundesbank’s policy committee told a West German news agency that larger deficit cuts would be needed for the United States to live up to the Louvre accord reached in February by the major industrial powers.

“The dollar cannot sustain a rally in this environment,” said Ronald Holzer, chief currency dealer for Harris Trust & Savings Bank in Chicago.

Central banks in West Germany, France and the Netherlands dropped key interest rates as part of an orchestrated move to stabilize the dollar and stimulate the European economy. But Holzer said traders were inclined by late in the day to characterize the interest-rate cuts as “too little, too late.”

“The deficit problem is still there . . . and the remedies remain in question,” he said.

Other experts said the dollar appeared to be stuck in a trading range.

“The dollar has shown little net movement over the past few days,” said James Vick, senior trader at Manufacturers Hanover Trust Co. “The direction right now is sideways.”

In Tokyo, where trading begins, the dollar closed at 134.93 Japanese yen, down from 135.37 last Friday. Markets were closed for a national holiday Monday.

In London, the dollar traded at 135.35 yen, up from 134.70 yen late Monday. Later in New York, the dollar brought 134.625 yen, down from 134.725 yen.

One British pound fetched $1.7775 in London trading, cheaper for buyers than Monday’s late $1.7865. But in New York, the pound was quoted at $1.7920, up from $1.7845.

Other selected late dollar rates in New York, compared to late Monday’s rates, included: 1.6685 West German marks, down from 1.6740; 1.36975 Swiss francs, down from 1.3730; 5.6695 French francs, down from 5.6825; 1,229.00 Italian lire, down from 1,232.75, and 1.31425 Canadian dollars, up from 1.31145.