Currency report

Press, 27 June 1983, Page 24

Currency report

The United States dollar eased last week despite another increase in money supply figures and firmer United States interest rates, according to the weekly foreign exchange report from Westpac Banking Corporation. United States money supply Ml rose again this week by 5.6 billion dollars to give an annualised growth of 30 per cent against the Federal reserve’s target of about 5 to 8 per cent and this predictablj’ led to dollar buying in early Monday trading in the Far East. However, expectation of slower Ml growth in the coming weeks, and lower United States interest rates in early July, has been enough to encourage a major sell-off of the United

States dollar as operators scrambled to take profit and square their books. This has pushed the dollar to lows of yen 237.00, D.M. 2.5200 and S.F.C. 2.0900: we expect the dollar to continue to trade at these lower levels for the next week or so. “Although the United States currency eased last week on expectations of lower money supply figures during the next two weeks, we believe that the fundamentals still point to strong United States currency. As long as the United States Government continues to show no commitment in reducing their huge deficit spending United States interest rates will remain firm,” says the bank.

Unlike the other major currencies, sterling has failed to gain much ground against the United States dollar, trading within a very narrow rate of 1.5200 to 1.5350. The main reason for this appears to be concern over the likelihood of further reductions in sterling interest rates in the near future. “The Australian dollar has been devalued 0.4 per cent during the past week, and we believe this is the commencement of a weaker trend for the currency. Capital inflow has been markedly lower over recent weeks on investor concern over rising inflation and potential industrial unrest later in the year,” the bank says.