FUTURES Action on the dollar

Press, 13 July 1985, Page 22

FUTURES Action on the dollar

A firmer New Zealand dollar and a shaky American dollar provided the action on the Futures Exchange this week. Mr Geoff McDonnell, futures manager at Mair and Company, Ltd, Christchurch, said the N.Z. dollar reacted to offshore events this week and strengthened to break the 4800 level again on the foreignexchange market. “With the U.S. dollar hovering on the brink of a long drop, futures traders are now nervous about taking big stands in the New Zealand market, and are content to day trade and have a square book at night. “If the U.S. dollar shows signs of settling in the 2.90 to 3.00 Deutschmarks range, it will be more pertinent for N.Z. traders to consider domestic events in their currency dealing.

“If, on the other hand, the 2.90 D-mark level is pierced and one pound sterling rises to be worth SUSI.4O. then N.Z. futures traders would want to favour the short side of the futures contract in the short term, as this means more strengthening of the kiwi dollar.” Mr George Price, of Egden Wignall Futures, said the market for the U.S. dollar contract ended the week with futures having re-tested their lows. Yesterday was characterised as ending on a subdued note, the active July and August contracts closing at or near their highs. “Technically, the market appears to be telling us that the oversold U.S. dollar is due for a rally and it may be time to start favouring the long side of the market,” Mr Price said. Dr Brent Layton, spokesperson for Marshall Futures said prices continued the downward trend that started late last week. The more active months dropped 600 to 700 points ($3OOO to $3500 per contract). The kiwi dollar firmed on the back of a general weakening in the U.S. dollar caused by increasing pessimism about the performance of the American economy. Other factors that helped put the kiwi dollar up were a sharp firming in the Australian dollar after better-than-expected trade figures, and the high interest rates in New Zealand. “At no point in the steady rise over the week of the kiwi dollar has a sharp reversal appeared likely. While N.Z. interest rates remain firm, the only threat to a firm N.Z. dollar is a sharp strengthening of the U.S. dollar.” Interest rates Mr McDonnell, of Mair’s, said 90-day commercial bill rates rose this week from 23.3 per cent to more than 24 per cent. The futures index dropped, favouring traders who speculated on the short side of the index early in the week. “Sentiment in the community points to a realisation that interest rates across the whole market have little chance of

reducing this side of Christmas. “The next indicator to watch is next week’s Government stock tender which may again point to a weakening in six-month and 12-month rates. “In the meantime, the futures index, anticipating the 90-day bill rate to be 24.5 per cent in September, may be out of touch with reality. “I would look to rates of 26 per cent in September, being a tax draw-off month. Accordingly, there is still room for the speculator to go short on the index.” Dr Layton, of Marshall’s, said the bear trend in interest rate futures prices continued throughout the week. Prices for the most actively traded months fell 135 points (approximately $650 per contract). Turnover averaged about 100 lots each day. The first delivery for the PCP contract took place yesterday. Paper worth $7.15M was delivered — 38 futures lots. Ten of the tenders were bank TCDs, 16 were promissory notes, and 12 were prime commercial bills. No bankaccepted bills were delivered. Wool Futures prices remained unchanged, said Mr McDonnell. A slight upwards movement occurred early in the week because of the amount of certified stock tenderable on to the futures market decreased 300 bales to 801. "This aspect, combined with more conjecture this week about possible shortages of wool early in the season, points to a keen demand for

wool, and suggests a long position in August, 1985, or October, 1985, may be the way to go.” Dr Layton said prices firmed slightly early in the week but then eased as reports from Europe suggested that the size of stockholdings there would restrict demand for wool from that quarter next season. The volume of trading was only moderate during the week until Friday, when the easing in prices increased turnover. The minimum deposits for wool contracts was reduced yesterday to $2OO for normals and $lOO for spreads. Previously, the deposits were $250 for both normals and straddles although some ..brokers have been charging their clients as much as $4OO per lot. Details of trading yesterday:

JUS CONTRACTS Mth Open H/L Last Vol Jly 2.0850 900/805 900 37 Aug 2.1050 100/050 100 21 Contracts traded: 58 COMMERCIAL BILLS Mth Open H/L Last Vol Aug 7550 555/41 545 25 Sep 7560 565/48 548 44 Oct 7600 607/00 607 3 Dec 7805 805/776 776 3 Contracts traded: 75 WOOL FUTURES Mth Open H/L Last Vol Aug 535 536/35 535 11 Oct 535 535/33 533 6 Dec 534 534/34 534 3 Jan 534 534/34 534 2 Mar 542 542/42 542 10 May 550 550/49 549 7 Aug 563 566/63 565 6 Oct 564 566/64 565 4 Dec 566 566/65 565 6 Jan 567 567/67 567 2 Contracts traded: 57

WOOL FUTURES MARKET WEEK ENDED JULY 12 Trading Traded prices Total Open cont’s months This week To date this Wool High Low Last High Low week July 12 Aug ’85 537 534 535 544 445 44 360 Oct ’85 537 533 533 556 472 22 341 Dec ’85 536 534 534 560 473 4 259 Jan ’86 536 534 534 560 474 14 348 Mar ’86 546 541 542 560 492 23 192 May '86 553 549 549 565 543 17 263 Aug ’86 567 563 565 571 549 12 150 Oct ’86 566 564 565 574 549 7 34 Dec ’86 567 565 565 571 563 9 37 Jan ’87 568 567 567 568 565 6 4 Totals 158 1988 Tenderable stock: 801 bales. 35F2D quotes — 531 as at June 27