Short-Covering Rally Lifts Dollar

The dollar broke away from falling stock and bond markets to rally sharply Wednesday after Federal Reserve Chairman Alan Greenspan said the central bank may raise interest rates to thwart inflation.

Greenspan’s message in scheduled congressional testimony took foreign-exchange traders by surprise. Many who had sold dollars on fear of a Wall Street sell-off scrambled to buy the currency, accelerating its rebound in what’s known as a short-covering rally.

“This was much wilder than anticipated,” said Roger Chapin, foreign-exchange manager at Bank One in Columbus, Ohio.

Exchange Currency in Dollars Dollar in foreign currency Canada .7315 1.3670 France .1755 5.6990 Germany .5916 1.6902 Great Britain 1.6343 .6119 Italy .000596 1678.00 Japan .008188 122.13 Mexico .128320 7.7930