Currency report

Press, 22 September 1980, Page 26

Currency report

The U.S. dollar received surprisingly little support from rising U.S. interest rates last week which could mean that the market participants are finally starting to “de-emphasise” interest rate differentials, and are beginning to focus their attention upon relative economic funamentals, according to the weekly foreign exchange report from the Bank of New South Wales. Double-digit money supply growth, large 1980/81 budget deficits and economic stimulus programmes advocated by the Republicans and the Democrats clearly threaten to rekindle inflationary expectations. Several bouts of middle-east

dollar selling were detected last week which indicates the O.P.E.C. reserve diversification process is escalating. The yen and mark were the major beneficiaries of this unwinding of middle-' east long dollar positions, which may reflect Arab concern over U.S. inflation prospects. The pound closed slightly firmer on market expectations that the planned U.K. dock strike will not ! materialise, and the min-< ’mum lending rate will be! left unchanged. News that the U.K. visible trade surplus narrowed to 63M in August from July’s record 216 M had little impact in tthe market.