$NZ edges down towards 53c

Press, 9 July 1986, Page 37

$NZ edges down towards 53c

PA Wellington The New Zealand dollar weakened marginally in quiet trade on the Wellington foreign-exchange market yesterday. The unit stood at 5U50.5320/35 near the close of trade after opening at 5U50.5325/40. Dealers said there was only light corporate activity as traders waited to see what interest rates the latest Government stock tender would fetch, and how the U.S. dollar would move. •

If interest rates rose in the tender then overseas investors might again be attracted, pushing the exchange rate up when their currencies were converted to kiwi dollars, dealers said.

However, they added the currency was unlikely to fall much in the near future.

At 4 p.m., SNZI was worth 1.158 marks, 34.7 p and 85.4 yen.

The Reserve Bank trade weighted index stood at 65.2 at 3 p.m., from 65.3 in the morning.

The U.S. dollar fell to 160.50/60 yen from its 162.05/15 opening, and was easier at 2.1835/45 Deutsch marks from 2.1890/05.

Dealers said the U.S. dollar was still under a lot of pressure. Its high opening had been caused largely by a technical correction as traders replaced their stocks of the unit after over-selling it.

The Australian dollar closed in Sydney yesterday at record closing lows on the U.S. dollar and on the Reserve Bank’s trade weighted index in continued bearish sentiment. The Australian dollar finished at 5U50.6265/72 — down almost one U.S. cent from its previous record, last Thursday of 5U50.6370/90. It ended at $U50.6425/35 on Monday.

The currency was marked down to 52.3 points on the Reserve Bank’s trade weighted index from its previous 52.6 low set last Thursday, and Monday’s 53.4. In early trading the local dollar slipped back in the face of a stronger U.S. dollar and at lower levels triggered added import selling. After a key 5U563.10 chart point was broken in the early afternoon the dollar pushed down to a trading low of $U562.55. In post-close trading the dollar fell to a record trading low of 5U50.6233, below its previous record trading lows of 5U50.6250, also set last Thursday.

Traders said the market lacks confidence ahead of the June release of balance-of-

payments figures and concern about any unexpected announcements from the Australian Labour Party national conference.

A Melbourne trading bank dealer said weakness of the Australian dollar on the other currencies — especially on the Japanese yen — tripped selling orders near the 100 yen levels. A rally in the U.S. dollar in Europe and America on Monday (early yesterday, N.Z. time) was expected by many dealers to be short lived.

They expected operators to use the higher levels to sell later in the week at a better price. Some were surprised at the strength of dollar buying, but saw this as mainly technical after the dollar’s steady decline last week.

The victory for the ruling Liberal-Democratic Party in Sunday’s Japanese Election should lead to a lower dollar and speculation is still strong for Japanese and U.S. rate cuts.

The dollar surged to close at 2.1820/35 marks from its weak opening at 2.1630/40 and the close on Friday at 2.1720/35. The dollar did not make up as much ground against the yen, closing at 160.65/75 yen, little changed from Friday’s close at 160.60/70. Nevertheless, it recovered from its weak opening at 159.25/35 yen and a record low in Tokyo of 158.90.

Dealers said the turnaround from the heavy specu-

lative selling overnight in Asia was probably sparked by another bout of Bank of Japan intervention — estimated at more than SUSI billion — to support the U.S. currency.

The strong victory of the party of the Prime Minister, Mr Nakasone, is expected to mean a continuation of recent policy towards the yen and international trade/

Dealers said Mr Nakasone’s party was expected to continue to cut Japanese trade surpluses, which had caused such controversy, particularly with the U.S., they said. Japan was likely again to come under strong pressure from Washington to allow the yen to rise further.

One British clearing bank dealer said Japan might cut its discount rate to mitigate the consequences of the higher yen. The U.S. would then use the opportunity of a Japanese rate cut to lower its own discount rate to revive its flagging economy.

Dealers believe the dollar will soon test its lows against the yen and mark. Operators believe Britain and West Germany may also cut their interest rates.