FUTURES Kiwi rampant

Press, 17 August 1985, Page 26

FUTURES Kiwi rampant

With interest rates likely to remain high the Kiwi dollar should hold up for some time and probably has some more “upside potential,” says Dr Brent Layton, futures manager of John Marshall and Company, Ltd, Christchurch. The Kiwi dollar after reaching 56 U.S. cents in London on Tuesday night dropped sharply on Wednesday morning to 53.7 c before recovering to over 55c later in the day. On Thursday and yesterday the dollar has fluctuated in the 54c to 55c range, but had another shake-out late yesterday. The volatility in the Kiwi dollar led to very sharp swings in futures prices. Mr Geoff McDonnell, futures manager of Mair and Company, Ltd, said the American dollar maintained its soft undertone this week with the belief that American interests rates might have to be lowered to help prop up the sluggish American economy. It broke through 2.76 Deutschmarks on Thursday and looked poised to go further. “Such a drop could help keep the Kiwi dollar up,” Mr McDonnell said. The Kiwi dollar had a highly volatile week, starting at 53.50 U.S. cents peaking at 56.00 U.S. cen'ts in London and finished around 54.00 U.S. cents. "Futures trading slowed late in the week, market participants adopting a wait-and-see attitude rather than firm beliefs that both the Kiwi and interest rates are on their way down. “We would watch out for any red herrings in next week’s Budget that could be interpreted as being currency management — procedures such as intentions for borrowing offshore by the Government at low interest rates instead of offering high rates in its Government stock tenders. “However, on the United States dollar futures contract we would suggest traders if in doubt stay out until post-Bud-get and then enter aggressively.” Interest rates PCP futures prices bottomed on Wednesday, but rallied sharply on Thursday and yesterday when interest rates in the money market started to drop. “We see the reaction in prices as short term and offering excellent opportunities to

open shorts,” Dr Layton, of Marshall’s, said. Mr McDonnell, of Mair’s, said physical market rates finned during the week, reflecting higher rates paid by the' Government in its stock tender on Tuesday, were rates increased 0.7 per cent for 210day Treasury bills from last week and 2.6 per cent for short-term bills — 70 days. The futures index fell 80 points early in the week but recovered late in the week because of what some traders described as a technical reaction. “However, from a technicalanalysis viewpoint the open position has been steadily increasing over the last two to three weeks confirming the bear trend of the index. We suggest holding all shorts,” Mr McDonnell said. Wool Prices of wool futures eased up to 9c over the week. Turnover was heavy. “A growing belief that the Kiwi is likely to remain firm for some time and that the Wool Board is likely to back off if it acquires a sizeable proportion of the offering sales has been behind the easing in futures prices,” said Dr Layton, of Marshall’s. Mr McDonnell, of Mair’s said wool futures prices continued their trend down, following the movements of the foreign-exchange markets. “Conjecture abounds that fu-tures-type wool is not saleable offshore unless New Zealand exporters can offer it 485 c or below. This makes the current spot price of 511 c too dear, and we would see December 1985, and January, 1986 futures trading around 490 c. “We would sit on shorts and

wait,” said Mr McDonnell. SUS CONTRACTS Mth Open H/L Last Vol Aug 1.8500 8600/8480 8575 13 Sep 1.8700 8950/8700 8800 39 . Contracts traded: 52. COMMERCIAL BILLS Mth Open H/L Last Vol Sep 7450 480/450 470 17 Oct 7570 600/570 600 16 Nov 7675 690/675 690 4 Dec 7790 825/790 825 2 Contracts traded: 39. WOOL FUTURES Mth Open H/L Last Vol Oct 503 505/503 505 3 Jan 503 504/503 504 21 Mar 510 513/510 513 21 May 517 518/517 517 15 Aug 533 534/532 533 28 Oct 535 536/535 536 7 Dec 534 534/534 534 1 Contracts traded: 96.

WOOL FUTURES MARKET WEEK ENDED August 16 Trading Traded prices Total Open months This week To date this cont’s Wool High Low Last High Low week Aug 16 Aug '85 482 482 482 544 448 1 49 Oct ’85 508 501 505 556 472 26 299 Dec ’85 508 502 502 560 473 372 10 Jan ’86 509 503 504 560 474 117 336 Mar ’86 518 510 513 560 492 94 198 May ’86 523 517 517 565 517 113 277 Aug ’86 541 532 533 571 532 75 114 Oct ’86 538 534 536 574 534 11 24 Dec ’86 539 533 534 571 533 6 36 Jan ’87 541 535 535 568 535 10 27 Totals 490 1570 Tenderable stock: 1307 bales. 35F2D quotes — 511 as at August