Currency report

Press, 22 June 1981, Page 22

Currency report

The United States dollar continued to weaken gradually during the week as a result of softening Eurodollar interest rates, says the Bank of New South Wales in its weekly foreign exchange report. The softer rate, were prompted by further decreases in prime rates by some major United States banks — Chemical Bank dropped its rate from 20 per cent to 19 per cent causing the market to believe others would rapidly follow. However, Citibank and Bankers Trust cut their rates to only 19.5 per cent the following day\ which effectively halted the prime dollar selling as operators took the view that interest rates were not going to drop rapidly’ after all. and the dollar finished the week well above its low’est levels. Sterling continued its recovery from the low of $1.91 reached the previous week. It traded back above the $2 level for the first time in two weeks, with strong commer-

cial demand for the currency. News that the British National Oil Corpqration cut its oil prices by $4.25 a barrel initially caused the pound to weaken slightly, but it soon recovered the josses and w’ent on to trade up to almost $2.02 — its high for the week. Continential currencies all show’Cd considerable gains as a result of the dollars weakness. However, the unstable political.situations in France and Poland continue to overshadow the market. In the E.M.S. joint float the mark is at the top 1.78 • per cent above the weakest member, Belgian franc. The yen also gained in the . wake of the weaker US unit, with wide fluctuations. There was a bout of heavy export dollar selling after Chemical Bank’s prime rate decrease, and yen traded below 220 for the first time in several weeks. However, once it became apparent United States interest rates were' not rapidly declining the yen weakened to close above 211.