Futures: the kiwi still flying

Press, 10 August 1985, Page 24

Futures: the kiwi still flying

The strengthening New Zealand dollar and the wool sales dominated the futures market this week. The dollar movement has brought scores of business people with overseas borrowings to the desks of futures brokers. The businesses seek advice on hedging, commitments against the time when the N.Z. dollar begins its longexpected fall. Some brokers have expressed surprise about the extent of overseas borrowing, for purposes down to the size of □locks of suburban flats. Mr Geoff McDonnell, futures manager of Mair and Company, Ltd, Christchurch, said yesterday that market sentiment still appeared to be bearish against tne U.S. dollar. “Some strong U.S. economic data will be needed to alter this. The N.Z. dollar is still attracting offshore attention because of our high interest rates. Offshore investors stand to reap a double benefit from both a high yielding return and a strong kiwi.” Many N.Z. business leaders who welcomed the deregulated money and currency markets were now showing cold feet as they tried to get to grips with implications of economic fluctuations. Comments recently from a whiteware and a lumber exporters pointed to the management of N.Z. companies finding things more complicated than they had expected. “The question now is will the kiwi continue to strengthen? It appears it will remain firm in the short term but if it fails to remain over 5300 consistently then this could signify the top end of the range. The thing to look for was any announcement in the Budget causing large sales of Government stock on the secondary market by offshore investors to get their funds out of N.Z. in a hurry. “If traders get a profit under these uncertain conditions they should take it and not sit on it.” Mr Goerge Price, of Egden Wignall Futures, said yester-

day that he believed the N.Z. dollar would continue to rise. Dr Brent Layton, spokesperson for Marshall Futures, of Christchurch, said prices had been relatively stable over the last week, mirroring the stability of the N.Z. dollar in the 52.5 to 53.25 U.S. cents range. “With a new round of Eurokiwis under way, the N.Z. dollar looks set to remain firm in the short term. Medium term, the outlook is less rosy. The revaluation of the kiwi is hurting exporters and when interest rates ease, as they probably will after the September tax take, a softening in kiwi is likely.” Wool Prices at the wool auctions on Thursday and yesteday were slightly better than expected, said Mr McDonnell, of Mair Futures. This had led to the futures market’s showing downside reluctance, he said. “It is too early in the season to form any definite views. Traders are all looking at currency as the major catalyst and not talking too much about full order books. “We see futures trading in a narrow range and would now start taking profits on any shorts.” Dr Layton, of Marshall Futures, said wool-futures prices eased on Tuesday, but remained relatively steady for the rest "of the week. Volume of turnover was only moderate. “The official quote for 35F2D for the first two auction days of the new season was 511 C per kg clean, down 3.8 per cent from the last sale of the 1984-85 season. “Futures prices did not fall as much as wool prices in general — the clean market indicator dropped 4.3 per cent — because traders were keen to pick up futures type wool to tender on to futures in fulfilment of short contracts. “Over the next few sales, prices for futures-type wool are likely to ease as short

covering for futures will not be a factor in the market.” PCPs The prime commercial bill (PCP), or interest-rate futures, dropped as the commercial-bill interest rates firmed 1 per cent, Mr McDonnell, of Mair’s, said. “We can see potential for profit by shorting the September contract before the August, 1985, contract finishes, when traders will concentrate on September and it’s susceptibility to tight liquidity due to tax draw-offs.” Dr Layton, of Marshall’s, said PCP contract prices continued the recent down trend until Wednesday. They then bottomed and bounced back a little on Friday. Volume of turnover was moderately active. “Much of the upward pressure on interest rates has in the recent past come from the forward foreign-exchange market. This pressure eased late in the week and is likely to continue to do so over the next

week or so. Futures prices are unlikely to fall much more in the short term," Dr Layton said. Details of trading yesterday:

Contracts traded: 49 BILL FUTURES Mth Open H/L Last Vol Aug 7380 430/380 430 12

Sep 7497 510/485 492 5u Oct 7580 630/580 616 29 Contracts traded: 91 WOOL FUTURES

Contracts traded: 36

WOOL FUTURES MARKET WEEK ENDED August 9 Trading Traded prices Total Open months This week To date this cont’s Wool High Low Last High Low week August 9

Totals 250 1587 Tenderable stock: 1307 bales. 35F2D quotes — 511 as at August

JUS CONTRACTS Mth Open H/L Last Vol Aug 1.9060 9060/8950 8950 38 Sep 1.9250 9250/9240 9249 10 Oct 1.9320 9320/9320 9320 1

Mth Open H/L Last Vol Aug 495 495/495 495 1 Oct 510 510/510 510 1 Dec 511 511/511 511 7 Jan 511 511/510 510 8 Meh 520 521/519 — 8 May 526 526/524 524 6 Aug 542 542/542 542 3 Oct 543 543/543 543 1 Dec 542 542/542 542 1

Aug ’85 516 495 495 544 445 8 110 Oct ’85 512 510 510 556 472 22 302 Dec ’85 513 509 511 560 473 30 228 Jan ’86 513 510 510 560 474 48 321 Mar ’86 526 519 519 560 492 50 177 May ’86 532 524 524 565 522 45 245 Aug ’86 546 542 542 571 540 26 123 Oct ’86 544 543 543 574 544 10 24 Dec ’86 543 542 542 571 539 7 34 Jan ’87 544 543 544 568 544 4 23