Currency report

Press, 20 September 1982, Page 22

Currency report

US interest rates moved higher again last week, on increasing concern over the expected surge in the US Ml money supply figures this month, says the Bank of New South Wales in its weekly foreign exchange report. Because Ml already exceeds the upper limit of the Federal Reserve Bank's target range, the market is anticipating last week's figure to range from plus $2 billion to plus $8 billion. This heavy Treasury financing requirements during the next few weeks were the major contributing factors to the higher interest rate levels. , "However, even if tlie Ml figure is on the high side of market estimates we are doubtful that the 'Fed' will be persuaded to lighten the market again, as this would only exacerbate the record number of corporate and financial failures currently plaguing the United States, and further delay the longawaited economic recovery.” the bank says.

The dollar strengthened sharply in response to the higher interest rates. Al its peak, the dollar touched Y 264.90, DMK 2.5270 and stg 1.6995. before profit taking caused the dollar to. lose ground. However, many market participants are of the opinion that with the de 7 pressed world economy

showing no signs of recovery, trade friction will lead to further protectionism. This will obviously cause more harm to the export orientated economies of Europe and Japan, while the effects on the U.S.A, would be limited. This has contributed to the strength of the dollar, and even if U.S. interest rates move lower again during the next few months, it is doubtful that the dollar will weaken significantly.