Kiwi under 52c

Press, 28 February 1986, Page 16

Kiwi under 52c

PA Wellington Reserve Bank selling of tbe New Zealand dollar may have been a major factor behind the currency’s sharp fall on the foreign exchange market yesterday, according to some dealers.

The kiwi closed at quotes of $U50.5185, compared with its $U50.5270/ 85 opening, after trading in a wide range between U552.80C and U551.60C.

Dealers said corporate and Reserve Bank sell orders, on top of the kiwi’s failure to gain this week against the weak US dollar, saw the local currency slump yesterday afternoon. One dealer estimated there was a corporate sell order of about SISOM, but market operators were unsure of the scale of the Reserve Bank’s activity. The Reserve Bank has a policy of not commenting on its market activity and dealers emphasised there was nothing unusual about it entering the market. But they said it appeared to execute more business than usual and

"'may have been active all week. “Much of the market was holding long positions in the kiwi hoping the weaker U.S. dollar would push the kiwi up,” one dealer said. “When it didn’t happen they were forced to sell their positions off. This and the big orders forced the kiwi down.”

Another dealer said the market had been tense all week, because the U.S. dollar was “falling out of bed” and firm domestic interest rates should have pushed the kiwi up. “There is market speculation that political forces are at work,” he said.

Almost a year since the currency was floated, the Reserve Bank’s tradeweighted exchange rate index yesterday was nearly back at its pre-float level. ’Ke index stood at 62.7 before floating last March 4. At 3pm today it was at 62.9, down from 63.9 at 9 a.m.

Some dealers predicted the kiwi would fall further in the near future. But the last two nights offshore the currency has attracted buying support to just over US53c.

The U.S. dollar closed much lower at 2.2180/00 marks and 178.50/65 yen from its local opening of 2.2350/65 marks and 181.60/

75. Sterling finished steady at 5U51.4825/40 from 5U51.4820/30 and the Australian dollar was slightly easier at 5U50.7075/82 against 8U50.7087/94. In the United States overnight, the price of gold plummeted, as investors took profits on gains they made on Tuesday’s sharp rise in response to political turmoil in the Philippines and other factors.

The U.S. dollar generally edged lower as traders digested further comments by the chairman of the Federal Reserve Board, Mr Paul Volcker, that he did not necessarily oppose a further drop in the dollar, although too great a fall could be dangerous. Gold had shot up as much as SUSI2 an ounce on Tuesday in Europe, as forces loyal to Corazon Aquino seized power in the Philippines and the former President, Ferdinand Marcos, fled the country. Analysts also said news of strikes at some South African gold mines and unconfirmed rumours of a strike at a Peruvian silver mine helped to bolster precious metals prices. However, gold plunged in trading on Wednesday night (N.Z. time) as much as $ll an ounce, as many investors decided to cash in their sudden gains.