Currency report

Press, 4 July 1983, Page 16

Currency report

The United States Ml money supply fell last week by SUS32OO million, its first significant fall for some time; however, as most operators sold the dollar during the week in anticipation of this, they were keen to take profit at the lower levels, says Westpac Banking Corporation in its weekly foreign exchange report. After reaching lows early on Monday of DM 2.5050, yen 236.40 and GBP 1.550, the dollar started to strengthen again. It then snowballed as dealers scrambled to cover short

positions as the dollar pushed through chart points on Chicago’s international monetary market. With Eurodollar rates firm because of end-of-quarter rollover pressures and the federal funds rate staying firm, the United States dollar selling pressure all but disappeared. Towards the end of the week the dollar turned lower again, in a typical performance for the end of a financial quarter.

The United States trade deficit for May of SUS69OO million was surprisingly high, and well above the

projections of $4OOO to $5OOO million. However, after an initial downward move, the dollar firmed again. “In a week where the news for the dollar was decidedly bearish the dollar showed considerable resilience — based we believe, on a strengthening United States economic recovery and continued expectations of firm United States interest rates,” the bank says. “We still believe that there is an underlying strength to the dollar and despite occasional profit taking, it will remain firm against the yen and the deutschemark. “Sterling, after opening the week a lot stronger, reached a high of 1.5500 because of talk of oil price increases by Russia and Egypt; however, it failed to maintain the momentum. “Profit taking set in after’ news of a United Kingdom current account deficit for May of £302 million and continued projections of further United Kingdom interest rate cuts. It is likely to continue to trade around its current level of 1.5250 this week, but could weaken further if interest rates show any sign of moving lower, Westpac said.