FUTURES Bucking kiwi kicks market alive

Press, 11 January 1986, Page 22

FUTURES Bucking kiwi kicks market alive

The bucking New Zealand dollar dominated the futures market this week.

Mr Barry Knutson and Mr Guy Morgan, of Marac International Futures, Auckland, said that keen exporter interest took the kiwi to the upper boundary of its current trading range of $U50.485/ 0.5250 early in the week. Despite some overnight selling later it was bought up by the locals.

“The contract’s chart formations are very unclear, though we lean to the view that the kiwi will test 0.5250 again next week.”

Miss Jenny Chin, of Marshall Futures, said that over the holiday break the kiwi settled within a narrow trading range of JU5.4950 to 0.5050. It was a welcome period for those involved in the sudden sell off to the kiwi dollar from the previous week but the tranquillity was not to last long. On Mondday there was uneasiness on the foreign exchange market in thin trading. Exporter interest from New York pushed the kiwi to a peak of JUS 0.5290 from a low in New Zealand of SUS 0.4955, and the open in Europe of 1U50.5105.

Further export interest and covering kept the unit well supported in the 0.5180-0.5250 range on Tuesday and Wednesday. Late Asian trading on Wednesday, which could either

have been speculative following chart points or rumours of Japanese disinvestment, pushed the dollar down to $U50.4960. The kiwi rose again yesterday morning to SUSO.SIOO as confidence was regained when there seemed to be no evidence of big Asian selling. The kiwi may also have been supported by the big fall of the U.S. dollar against major currencies on Thursday night Y, Futures reflected all this by trading for January 1986, from a high of 2.0258 on Monday to a low of 1.9185 on Tuesday — a profit or loss of 15325. Trading was very volatile and volume picked up during the week. Through all this the local unit on every rise looked susceptible to heavy selling pressure. A close of the kiwi at 0.5260 might have pushed the unit through to blue skies,” Miss Chin said.

Mr Geoff McDonnell, futures manager of Mair Astley, Ltd said a large amount of volatility was in evidence this week, caused mainly by a thin market Sentiment was for the kiwi to remain in the 1U50.4800 to 0.5300 range. “We would advise traders to operate at the extremes of this range.” PCPs

The PCP (interest-rate) con-

tract ranged over 80 points this week and finished near its lows.

Mr McDonnell said the movement was volatile, which reflected call rates moving from 11 to 21 per cent during the week. This might have been because of funds being sought to settle Treasury bills. “The sentiment is for 90-day money to rise in value, with one case on Friday of a dealer lending 90-day money at 23 per cent The big question now is what will 90-oay money be worth in March? Some big positions have been taken in the March delivery month by some merchants, and traders can look forward to some exciting movements. We favour shorting the index.” Mr McDonnell said PCPs might offer a better investment than Brierley’s shares at present. The March PCP contract closed at 7770 yesterday. This indicates an anticipated physical short-term interestrate of 22.3 per cent. Mr McDonnell believes it is a “safe bet” that short-term interest rates will be about 25 per cent in March. But if the interest rate were even only 2.0 per cent, the shorting (selling) investor would make a profit net of brokerage, of about $BOO per contract. The deposit per contract is. $3OO. “You would have to invest thousands in Brierley shares to

make that return in the same time,” Mr McDonnell said.

Miss Chin of Marshall’s said prices eased this week as 90day bill rates firmed slightly on the physical market Futures appeared hesitant to move down too quickly. March moved the most to a low yesterday of 7765. January and February both ended around a level already higher than physicals. “Even so, I see further downward movement if the physicals look like firming.” Mr Knutson and Mr Morgan, of Marac International Futures, said they still believed the PCP down side was limited to 7800, basis January. Wool

Trading on the wool market over the holiday break was quiet, speculators and hedgers awaiting the turn-out of this weeks wool sales in Napier and Invercargill, said Mr Guy Spooner of Marshall Futures.

“As expected, the wool sales were weaker, the 35F2D quote at Napier easing 5c on Wednesday to 510 c per kg and in Invercargill to 489 c per kg on Thursday.” The sale m Napier yesterday compared with the first day’s offering, was easier, but because of the better quality of wool was 6 to 8c firmer than at the Invercargill sale. “This particular movement

was anticipated by the futures traders on Thursdays, so prices did not move downwards in reaction to the Invercargill offering, but instead firmed by 3 to 4c.

“Traders in the near future must be cautious and watch closely any large movements in the N.Z. dollar against major currencies as well as physical market trends,” Mr Spooner said.

Mr McDonnell, of Mair Astley, said wool futures prices had moved off their lows, the catalyst being the "thought” that a potential weakening of the kiwi dollar during the N.Z. winter could boost auction prices in the 1986-87 season. “Giving weight to this is the view that a levelling out of the U.S. dollar during our winter, and a subsequent rise of it later in 1986 could make it easier ,for other countries to purchase N.Z. wool. “With futures prices showing reluctance to move, we may have to cover shorts already opened with a view to moving aggressively in the market once a firm view on currency can be taken,” Mr McDonnell said. International

Mr Knutson and Mr Morgan, of Marac International Futures, said that most interest this week focused on the international markets.

“The U.S. dollar which strengthened early in the week, was unable to sustain its gains against most currencies, and fell sharply on Thursday, prompted by concerns over the Libyan situation.

“A surprisingly good nonfarm payroll employment figure in the United States induced a long-awaited correction in the American credit markets as it indicated a healthy economy and lessened the likelihood of a cut in the discount rate.

“This in turn hurt the sharemarket, as corporate profitability is impaired, and when the economist, Kaufman announced that he did not expect a cut in the discount rate in the near future, this spelt the end of the rally in the SPSOO and Dow Indices, and the latter had its .largest fall ever. “We expect further weakness in the U.S. dollar, and believe that by the end of the week the declines in the sharemarket and credit markets will be over. Their rallies remain intact and the corrections of this week are very healthy. Call options on these in particular are very attractive at present Gold and silver, which rallied on Thursday, mainly on the back of the U.S. collar decline, though they remained in a long-termbear market, had shown surprising strength, and the long side should be favoured at present. Details of yesterday’s futures trading: SUS CONTRACTS Mth Open H/L Last Vol Jan. 1.9650 9650/9650 9800 11 Contracts traded: 11 Open positions at January 9: Jan. 348, Feb. 10, Mar. 1, Jun. 1, Sep. 1, total 361 (down 41). COMMERCIAL BILLS Mth Open H/L Last Vol Jan. 7900 900/870 877 51 Feb. 7875 900/860 865 77 Mar. 7780 785/765 770 100 Contracts traded: 228 Open positions at January 9: Jan. 370, Feb. 391, Mar. 891, Jun. 92, Sep. 74, Dec. 17, total 1835 (up 9). WOOL FUTURES Mth Open H/L Last Vol

Open positions at January 9: Jan. 26, Mar. 224, May 385, Aug. 203, Oct. 203, Dec. 218, Jan. 186, Mar. 285, May 180, total 1910 (down 6).

Jan. 500 504/500 504 14 Mar. 596 506/506 506 4 May 515 515/513 513 6 Aug. 525 525/521 521 18 Oct. 525 525/522 522 9 Dec. 525 526/522 522 13 Jan. 526 526/522 522 8 Mar. 531 531/530 530 4 May 537 contracts 537/535 traded: 79 535 3