Currency report

Press, 3 December 1979, Page 24

Currency report

Concern over escalating tensions in the Middle East continued to dominate trading in foreign exchange markets last week, according to the weekly foreign exchange report from the Bank of New South Wales. A call by the Ayatollah Khomeiny for mass military training in Iran — together with generally lower United States interest rates —i caused the dollar to fall; steadily last week. Bankers Trust Company, of the l United States, cut its prime rate i per cent to 15| per; cent, and there is a general; feeling United States interest; rates may have peaked. This I

caused a flow of funds into': the long-term market, and' might spark a general cut in ' prime rates. The Japanese Finance 1 Ministry acted to defend the slipping yen by sharply i tightening some of its foreign exchange controls. The present import settlement bill system under which the Bank of Japan lends yen funds for imports at 7 per jcent will be abolished on ■ December 3. ■ I Japanese importers have been taking advantage of the I system to settle imports with yen funds instead of ; borrowing higher interest I United States dollar usances I at about 15 per cent. The I present reporting system on

foreign exchange transact tions to the Bank of Japan by trading banks will also be tightened. The centra! bank again stepped into th« market — selling an estn mated total of to support the yen, which briefly reached 150.60 against the United States dollar. Sterling closed firmer against the dollar and majoe European currencies. Ster« ling benefited from the ing against the dollar as volatility in the gold market raised the prospect of an« other bout of currency jit« ters. Union decisions favour* ing a return to work at Brit* ish Leyland car factories also helped sterling.