SUS falls sharply
NZPA-AP New York The American dollar fell sharply against most major foreign currencies on Friday after the United States Government reported that the foreign trade deficit surged to a record monthly high of SUSIB billion in July. Trading was surprisingly active in advance of the long Labour Day week-end. Banks, stock exchanges, and commodity markets will be closed in the United States today for Labour Day.
Gold prices were mixed. Bullion was quoted at $U5387.75 an ounce at 4 p.m. (8 a.m. Saturday, N.Z. time) at the Republic National Bank in New York, up $1.25 from Thursday’s late bid. In early trading before the Commerce Department issued its trade report, the American currency strengthened despite uncertainty about how large the merchandise trade deficit would be. Dealers had initially expected the July shortfall to be little different from the SUSI 4.2 billion deficit in June. But the dollar was knocked back by the July figures, which pushed the trade deficit for the first seven months of the year to almost SUSIO2 billion. “As soon as the trade number was announced, the cjollar very quickly dropped,” said Mr Tom
Benfer, a commercial trader with the Bank of Montreal, in New York. “Then for the remainder of the day it slipped lower, lower and lower.” Mr Gary Dorsch, a currency analyst with G.H. Miller and Company in Chicago, said selling was widespread in a market that was more active than it had been in recent days.
The trade report, which showed that the manufacturing and agriculture sectors were, especially weak, was bad news for the dollar because the Federal Reserve Board may respond by cutting its discount rate again in September to help ease the financial stress on
those sectors of the economy.
The board cut its discount rate earlier in September to 5.5 per cent from 6 per cent. The nation’s banks responded a few days later by cutting their prime rate to 7.5 per cent from 8 per cent.
The discount rate is what the Federal Reserve System charges banks for loans. The prime rate is what the banks charge on loans to their most creditworthy customers. Sterling fetched 5U51.4915 in New York compared with 1.4770 Thursday. Other New York dollar rates at 4 p.m. local time compared with late rates on Thursday: 2.0295 Deutsche marks, down from 2.0520 DM; 153.85 yen, down from 156.10; 1.6390 Swiss francs, down from 1.6550; $CanL3B725, down from $Cah1.39195; 6.6525 French francs, down from 6.7200.
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Press, 1 September 1986, Page 16
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413SUS falls sharply Press, 1 September 1986, Page 16
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