Currency report

Press, 3 August 1981, Page 20

Currency report

A lack of conclusive developments led to relatively subdued trading on international financial markets during the week.- according to the weekly foreign exchange report from the Bank of New South Wales. The United States dollar weakened initially on the news that the weekly money supply figures showed a larger-than-expected fall m United States Ml-B money supply. The dollar began to recover arround mid-week as interest rates remained firm despite some apparent easing of liquidity. Trading predominantly remained cautious as the market awaited the outcome of the emergency Polish Party Congress and the testimony of U.S. Federal Reserve chairman, Paul Volcker, before Congress at which he is expected to disclose money growth targets for 1981 and 1982. Sterling remained depressed against most major currencies, particularly the U.S. dollar. The main factors undermining the U.K. currency remained a lack of confidence in the British

economy, unattractive sterling interest rates, and the present strength of the U.S. dollar.

The Japanese ven weakened against the tI.S. dollar, but remained steady against most other major currencies. Buying of U.S. dollars by Japanese and foreign banks to cover commercial needs placed downward pressure on the Japanese currency, which consistent intervention by the Bank of Japan failed to stem.

The Canadian dollar plunged to its lowest level since the 1930 s depression as market sentiment, helped by significant corporate selling, continued to go against the unit.

Canada raised its bank rate to a. record 20.54 per cent on Thursday but failed to halt a slump in the value of the Canadian dollar. The Canadian Government tried to halt the Canadian dollar’s slide by urging banks to curb lending finance for take-overs of foreign firms by Canadian companies. Financial analysts estimate that such take-overs have drained $Can6OOOM from the economy this year.