Aust. currency hedge market opens

Press, 11 June 1979, Page 18

Aust. currency hedge market opens

NZPA Sydney The major Australian banks will officially open their new foreign currency hedge market today, giving business houses a new means of protecting themselves against variations in exchange rates.

The new market, which has been running on a trial basis for the past fortnight, is seen as a complement to the existing official market run by the Australian Reserve Bank through which some importers and exporters are able to buy and sell foreign currencies at a spec-1 ified rate for acceptance or; delivery in the future. The Reserve Bank facility! is available only for cover on specific import or export contracts, and must be taken up within seven days of the “exposure” occuring.

Under the banks’ scheme.; traders will be able to buy a, contract for the purchase of; delivery of a foreign cur-1 rency at a future date' whether or not there is a specific present need. ; As such it will be open to speculators, since the contract may be sold or ex-1 changed for one of an oppo-1 site character, before the; contract matures. However bank officials expect the bulk of their busiIness will be from genuine 1 exoorters and importers, or; from companies involved in, loverseas fund-raising pro-| ’grammes and need protec-’ tion against movements in 1 exchange rates. Besides complementing the; official Reserve Bank forward market, the new hedge market will be in competition with the “grey market” run by merchant bankers. And it will be in competition also with the currency futures market planned by the Sydney Futures Exchange and due to be working when the futures

.[exchange moves to new 11 premises later this year. : The “grey market” seeks •Ito match traders who have a ‘‘foreign currency selling re- .; quirement with those who have a buying requirement > The banks say they will •’be able to improve on this -I facility since they will not (have to match individual ijcustomers but only an overall buying and selling requirement. i Each bank will try to ■'match its own customers. ■;but will also put all orders i out to a Sydney money I broker who will be matching ■’lnterbank requirements. i Rates offered will reflect [both differences in interest ■ rates ruling in Australia and abroad as well as the mari ket’s assessment of how ex- • change rates will move in the future. During the trial period, attention has been confined almost entirely to U.S. dollars, with an ’excess of sell- : ing over buying orders, and • the market has been keeping 1 the U.S. dollar at a small discount.