Currency report

Press, 5 September 1983, Page 21

Currency report

“As expected, the previous Friday’s U.S. money supply figures dictated the tone of last week’s trading,” says Westpac Banking Corporation in its weekly foreign exchange report. The Ml figure was widely expected to decline by SUS9OO million; however it fell only SUS2OO million, which precipitated a rush to buy U.S. dollars on the foreign exchange markets. Last week has seen a continuation of this trend, with the U.S. dollar reaching a high of dmk 2.7100, jpy 247.20 and gbp 1.4900. The bullish sentiment for the U.S. dollar is being fuelled by expectations of a surge in the Ml money supply growth during early September, and statements by several prominent financial figures in the United States that U.S. interest rates are likely to move higher again during the next few months.

The market’s apparent enthusiasm for U.S. dollars has not been dampened by the U.S. trade figures for July, which showed the deficit widening to SUS636O million. In addition, the U.S. leading economic indicators for July rose only 0.3 per cent, down from a 1.9 per cent rise for the previous month. “We continue to remain bullish for the U.S. dollar, and apart from periodic bouts of profit taking, we can see little reason for the dollar to weaken during the next few weeks,” the bank says. “The deutschemark will again take the brunt of the U.S. dollar' buying, while the yen looks likely to trade between 245 and 247 on commercial business. We believe sterling may move lower in the short term now that the British oil companies oil tax payments have been made.”