FUTURES $US contract drops $1750

Press, 13 April 1985, Page 24

FUTURES $US contract drops $1750

After a quiet three days the United States dollar futures contract burst into life yesterday. The April, 1985, contract opened 200 points ($lOOO per contract) lower at the start of the morning call and dropped another 150 points ($750 per contract) at the start of the afternoon call.

Dr Brent Layton, of Marshall Futures, Christchurch, said the movement reflected a firming of the New Zealand collar on foreignexchange markets, after the sell-off of the United States dollar overnight on Thursday. “The United States unit declined in value on international markets due to growing concern about the health of the United States economy — which was encouraged by retail sales statistics announced overnight — and a spread of the view that United States interest rates look set to ease as the Federal Reserve takes steps to revive the slowing economy.” Mr Geoff McDonnell, futures manager of Mair and Company, Ltd, said the United States dollar had weakened through the week, favouring futures traders who had opened short positions. "Bearish news from the United States concerning rumours of more United States banks in trouble, and lower-than-expected March retail sales took their toll on the United States dollar,” Mr McDonnell said. “However, it appears that the slide of the United States dollar may be arrested, simply because the news from the United States cannot get much worse, and sooner or later the United States dollar will react to bullish fundamentals, which could start appearing after such a saturation of bad news.” New Zealand futures traders should still consider the actions of major New Zealand exporters and importers in foreign exchange before taking a oosition, he said. Such action was reflected in the spot rate on the foreign-exchange market, and current sentiment was that the New Zealand dollar was overvalued. “We believe that it may be time to go long on the United States dollar futures market and this stance may be supported by some United States commentators, who say that the United States dollar has still not reversed its upward move.” Wool contract Dr Layton, of Marshall’s, said it had been a dull week in wool futures, prices showing

no direction. No major catalyst was present on the physical market to push prices around.

“However, indications are that end-of-season auctions will be strong due to a possible shortage of wool as evidenced by rearrangement of the auction rosters and the 309,000 bales previously rostered from April 12 to the end of season now being reduced to 246,000 bales. On this supply-and-de-mand basis wool futures prices will probably stay firm or move upwards,” Dr Layton said. Mr McDonnell, of Mair’s, said that the wool futures market was very quiet during the shortened week. Traders were showing little interest in altering their positions. "The wool roster has been revised over the last week. Some auctions have been cancelled and the offering at others have been altered — in some cases increased and in others reduced. The combined offering in April is now 113,000 bales (originally 114,000); in May, 141,000 bales (156,000); and in June, 77,000 (78,000), The next reduction from the original scheduling is 17,000 bales, equivalent to one small auction.” He gave as reasons for the net reduction: 0 Some shift to private selling by farmers concerned about having payment for wool sent to auction delayed because of industrial action by woolstore workers. • Some farmers deciding not to second shear because of low-feed supplies for sheep resulting from the drought. • Reduced fleece weights from drought-affected flocks. “The implication for futures prices is not very bullish. To the extent that wool is merely being diverted out of the auction system there will be no effect on prices. To the extent that second shearing is being abandoned, the amount of fleece wool — which is what the futures market relates to — available early next season will be increased?’ Mr McDonnell said. Orders and inquiries at export houses were still thin. For many types Australia was a cheaper" source of supply, because the weakness of the Australian dollar and the Australian Wool Corporation lowering its selling prices. “We, therefore, still favour the short side at present futures prices,” Mr McDonnell said. Details of trading in the United States dollar contract yesterday were:— ?US CONTRACT 85 Open H/L Last Vol Apr. 2.2005 .2051/4880 .1930 169 May 2.2190 .2220/.2120 .2220 5 June 2.2500 .2500/.2400 .2478 6 Sep. - - .3325 1 Dec. — _ _ _ Mar. — — _ _ Contracts traded: 181.

WOOL FUTURES MARKET WEEK ENDED APRIL 12

Tenderable stock: 847 bales. 35F2D quotes — 510 as at April 3.

Trading Traded prices Total Open months This week To date this cont’s Wool High Low Last High Low week Apr. 12 May ’85 511 510 510 544 445 12 654 Aug '85 532 531 532 556 472 6 596 Oct '85 535 535 535 560 473 10 438 Dec ’85 537 536 537 560 474 6 359 Jan '86 538 536 538 560 492 8 448 Mar ’86 547 546 547 565 543 2 248 May '86 553 552 553 571 549 4 208 Aug ’86 567 564 564 574 563 7 106 Oct ’86 567 567 567 570 567 1 3 Totals 56 3060