Lack of direction in $US trading

Press, 28 May 1984, Page 26

Lack of direction in $US trading

The United States dollar has been directionless last week, with most operators still struggling to establish the next direction for the currency, says Westpac Banking Corporation in its weekly foreign exchange report For instance, on Thursday the dollar turned sharply lower against other major currencies in United States trading after advancing in European markets. Dealers said that the dollar encountered what appeared to be “panic selling” at times in United States trading after it came under severe pressure from rumours, none of which was confirmed, that more American banks were in financial difficulty. Some analysts speculated that the Unitea States Treasury Department might have told the Federal Reserve Board to intervene in foreign exchange markets after the Deputy Secretary of the United States Treasury, Mr R. T. McNamar, told reporters in Washington that the foreign exchange markets were “disorderly.” The deutschemark continues as the most volatile of currencies, initially it gained strength against the United States dollar as the possibility of a solution arose between employers and striking West German metal workers, with the dollar easing to a low of DM 2.7315. However, it quickly rebounded to the

week's high of DM 2.7735 on news that other West German unions were considering joining the striking metal workers. The yen has remained relatively stable after intially suffering from an escalation in Middle East tensions, because of its heavy reliance on Middle East oil supplies. However, it strengthened later in the week against all currencies after the announcement that the United States and Japan had reached agreement on plans to internationalise the yen. It is widely believed that these plans will ultimately lead to a strengthening of the yen against the United States dollar. Sterling initially benefited from the Middle East ten-

sion, it suffered later in the week because talks between the United Kingdom miners and the Government, aimed at resolving the strike, broke down. The Australian dollar continues to move in line with the United States dollar, and the bank sees this trend continuing, but with limited downside movement below .8900 against the United States dollar. On Friday, the sAust closed easier against most major currencies. “We expect the United States dollar to remain generally firm, supported by high United States interest rates, industrial troubles in the United Kingdom and West Germany, and continued tensions in the Middle East,” the bank says.