$US resumes its rise

Press, 10 September 1984, Page 28

$US resumes its rise

The month of August proved to be very quiet for ' the foreign exchange markets, says Westpac Banking Corporation in its weekly foreign exchange report Participants were uncertain over the next likely direction of the dollar, and consequently it traded within relatively narrow radges for most of the month/ . However, September has seen a dramatic rise in the U.S. dollar, with trading ranges, for the week being Dmk 2.8835 to 2.9530, Jpy 241.15 to 244.90, GBp 1.3120 to 142820, and sAust 0.8530 to 0.8275. The underlying reasons behind this strong demand for U.S. dollars have been renewed confidence in the strength of the U.S. economy and a further weakening of the U.S. credit markets. This rapid turnabout in market sentiment is typical of , the foreign exchange markets during the past two years, with the end result being the U.S. dollar bears being caught out once again. » Over all,: there is little reason to expect the U.S.' dollar to decline this week, apart from a bout of profittaking, and there is certainly room for it to strengthen further. Last week has seen the Deutschemark read 2.9550, its highest level since floating rates were introduced in

March, 1973. With the movement last week being in the order of six pfennigs, it would not be surprising to see some profit-taking emerge later this week. “However, we expect the Deutschemark to remain weak, with the objective of Dmk 3.00 becoming increasingly likely,” the bank says. “Sterling has weakened against, the U.S. dollar,, reaching near record lows against this currency. Industrial relations appear to be’ worsening in the U.K.; however, the Bank of England has been defending the pound, and if sterling comes under renewed selling pressure, there are strong rumours that interest rates will be raised again. j r “We remain with our view, ( however, that on a long term basis sterling will weaken gradually.” ' The Australian dollar staged a dramatic turnaround last week, weakening rapidly against all: major currencies. Against; the New Zealand dollar, it has moved from last week’s;, level of 0.5865 to its present; * level of 0.5945, a movement of 80 points.■] “Although we were looking for a weaker trend for the Australian dollar, the size of the movement has ■ exceeded our expectations;; In the short term we would! expect a slight correction,! and look for a trading ranges this week of 0.5920 to) 0.5970,” Westpac says, ./y