FUTURES Strong $NZ pulls contract down

Press, 23 March 1985, Page 26

FUTURES Strong $NZ pulls contract down

Prices of United States dollar futures contracts fell sharply this week in line with the American currency.

offshore bearish news, and sterling's rise all point to sterling’s being favoured,” Mr McDonnell said.

Finn interest rates encouraged the New Zealand dollar to rise against the United States dollar, by enticing funds to be repatriated to New Zealand by exporters. Other factors to cause the move were firm interest rates in New Zealand, causing funds to be repatriated to New Zealand, thus strengthening the New Zealand dollar as exporters brought in funds to square their books before the end of the month and the end of the financial year this month. Mr Geoff McDonnell, the futures manager of Mair and Company, Ltd, said the sentiment overseas had changed against the United States dollar, as bearish information came to hand, such as that of the Ohio thrift banks, the gold price rising because of the Middle East tension, and lower-than-expected G.N.P. in the United States. “We feel the trend of New Zealand futures prices on the United States contract is down, and favour short positions as the April, 1985, price is 3c to 4c higher than March, 1985. ‘'Whether the New Zealand dollar will devalue much in April is debatable because of the revaluing effects since the float

“Indications are that importers are not committing themselves to arranging finance and that exporters are bringing in funds into New Zealand. These events in New Zealand,

late this week, with sterling rising, the New Zealand dollar strengthening, and the United States dollar falling, it bad become more favourable for New Zealand exporters. Auctions recently had been fully firm and with more liquidity in the economy after Easter" trade houses ’ might move aggressively at auction, and futures price might rise, Dr Layton said. Dr Layton said that, as he had predicted in last Saturday’s column, wool futures prices dropped sharply early this week. The lows were reached on Wednesday. The August, 1985, contract dropped 9c, or $225 per contract, from Monday’s level to the low on Wednesday. Late in the week prices firmed again on profittaking. “While the short-term outlook for wool is not good, the lows in futures do not appear to be far off present price levels, and we recommend cautious buying on any easing in prices,” Dr Layton said. New contract

On Monday, Tuesday, and Thursday nights the United States dollar weakened significantly against other major currencies on foreign exchange markets, said Dr Brent Layton, of Marshall Futures, Christchurch. “The weakness early in the week was attributed by commentators to a crisis in confidence in savings and loan associations in Ohio and a sharper than expected fall in February house starts in the United ' States, stimulating fears that the United States economy is slowing.” On Thursday the “flash” forecast of real United States G.N.P. growth in the first quarter was 2.1 per cent, much below the 3.5 per cent most commentators were expecting, and the United States unit was sold down sharply on Thursday night, New Zealand time. (Report of United States G.N.P. statistics, page 23.) “Over the week United States dollar futures dropped sharply. The two most actively traded contracts — March, 1985, and April, 1985 — both fell more than 1100 points, or $5500 per contract. Volume was high, except on Monday, and on Friday turnover exceeded 300 lots, worth $l5 million, for the first time. Wool Wool futures prices fell an average of 5c to 6c across the board this week as traders realised that futures prices were at too much of a premium over auction prices, said Mr McDonnell International currency movements had hindered trading on the physical market, but

It is believed that New Zealand Futures Exchange members will be at their offices next Saturday, having trial trading for the new interestrate contract

The contract will be based on 90-day prime commercial value with a face value of $200,000. The contract will allow hedging against changes in short-term interest rates.

JUS CONTRACT 85 Open H/L Last Vol Mar. 2.1636 .1760/.1480 .1760 115 Apr. 22190 2190/.1750 2030 189 May — — — — June 2.3000 .3000/2740 2740 2 Sep. — — — — Dec. - - - -

Contracts traded; 306.

WOOL FUTURES MARKET WEEK ENDED MARCH 22 Trading Traded prices Total Open months This week To date this cont’s Wool High Low Last High Low week Meh 22 Meh ’85 490 475 482 536 444 2 41 May ’85 505 499 505 544 445 39 791 Aug ’85 530 521 526 556 472 190 793 Oct '85 532 525 530 560 473 99 531 Dec ’85 533 528 532 560 474 53 428 Jan ’86 536 531 536 560 492 62 528 Meh ’86 546 542 544 565 543 116 330 May ’86 552 549 552 571 549 41 276 Aug ’86 565 562 564 574 563 22 114 Totals Tenderable stock: 674 bales. 35F2D quotes — 587 3832 502 as at 21.3.85.