Foreign exchange markets nervous

Press, 27 February 1984, Page 14

Foreign exchange markets nervous

Foreign exchange markets continued to be nervous and volatile last week as operators experienced difficulty in assessing the United States dollar’s next direction, said Westpac Banking Corporation in its weekly foreign exchange report. “With U.S. markets closed earlier in the week we expected the Far East and Europe to test the downside potential of the U.S. currency,” said the bank. “However, a resurgence of tension within the Middle East, an increase in U.S. money supply figures of SUS2.S billion and an upward revision of U.S. G.N.P. figures for the last quarter of 1983 by .4 per cent to 4.9 per cent led to a bout of profit-taking, pushing the dollar to the Deutschemark 2.7150 level. However, U.S. operators started to aggressively sell the U.S. currency at this higher level and we have seen the dollar rapidly move back down to its current level of 2.6600. “Sterling traded in a narrow band last week, supported by tension in the Middle EAst and possible closure of the Straits of Hormuz. We expect sterling

to strengthen against the U.S. dollar but to weaken against most other currencies." The Japanese yen has remained relatively weak as the Middle East conflict has affected this oil-dependent economy, however, we expect the yen to bounce back against the dollar during the coming weeks. “The Australian dollar has been subject to bouts of profit taking as the currency failed to break through the 0.9475 — 0.9500 level against the U.S. dollar.

and fell to a low point of .9300. We expect the currency to remain nervous and volatile in the short term, but feel a continued weakening U.S. dollar should see the Australian dollar back to the 0.9500 level. “Over all we expect this bearish sentiment for the U.S. currency to continue but feel that it will be subject to bouts of profittaking at the lower levels, particularly in the Deutschemark,” said the bank.