Dollar soars on new recovery evidence

THE SHARPEST surge in US durable goods orders for 18 months yesterday provided more evidence of an accelerating US recovery and propelled the dollar to a six-year high against the pound.

Sterling closed 1.95 cents lower against the dollar at dollars 1.4910 but was little changed against the mark at DM2.3983.

David Cocker, of Chemical Bank, said the pound had failed to rise against the mark on the dollar's coat-tails because of nervousness after Tuesday's base rate cut. But selling of the pound had unearthed corporate buyers.

A big increase in demand for commercial aircraft helped durable goods orders jump by 9.1 per cent in December, according to the Commerce Department. This followed a 1.6 per cent fall in November and was around five times the rise forecast by Wall Street.

'This is obviously good news for the economy', said Angus Armstrong, of Morgan Grenfell.

But he added that a slowdown in consumer spending was likely to see the recovery decelerate. He expects the economy to grow at an annual rate of 2.5 per cent in the first half of this year following 3.8 per cent growth in the fourth quarter of 1992.

December's increase took durable goods orders to dollars 134.47bn, the highest for four years. Orders for 1992 as a whole were up 4.1 per cent on 1991, the first increase since 1988. Excluding transport, they were up by 5.5 per cent in December over November.

(Graph omitted)