Kiwi, $US both volatile

Press, 10 January 1987, Page 25

Kiwi, $US both volatile

PA Wellington The New Zealand dollar closed off its lows for the day after a USlc drop in volatile trading on the foreign exchange market Meanwhile overseas, the Japanese central bank was battling to stop the U.S. dollar falling. The currency finished at 5U50.5355/62 against its $U50.5420/27 start and 0.5388/95 finish on Thursday. The morning’s low was $U50.5300. Dealers said selling began following a statement from the Minister of Finance, Mr Douglas, that no further Government bond tenders would be held this financial year. They said this was seen by some as a sign of lower local interest rates. Dealers said speculative selling ahead of Mr Douglas’s statement had already weakened the currency in early trading. Many dealers said the currency would remain soft next week and weaken further because of lower interest rates. Others said interest rates may firm again next week and capital flows will continue in the currency’s favour. The trade-weighted Reserve Bank exchange rate index was at 64.6 at 3 p.m. ■ The value of the New Zealand dollar yesterday morn-

ing (BNZ seUing rates), compared with its value immediately before it was floated in March, 1985, was: Mar 1 Jan 9 1985 1987 SUS 44c 53.4 C Sterling 41.15 36.2 p Canada 61.2 c 73.4 c France 4.49ffr 3.4lffr H.Kong $3.43 $4.12 Japan 114 yen 84yen N’lands 1.66 g 1.12 g S’pore 99c $1.16 Switz I.26sfr o.B6sfr W.Germ. L47dm 1.02dm Austral. 62.4 c 80.7 c Japan’s central bank intervened massively in foreign exchange markets yesterday making possibly its biggest single-day purchase of dollars in a bid to prop up the American currency against the yen, dealers said. They said the bank went on an unusually public buying spree even though the United States appeared to be looking for its currency to weaken. The central bank bought an estimated SUS2.S billion in the morning, the largest amount dealers believe ever has been purchased by the bank in one day. The Finance Minister, Mr Kiichi Miyazawa, said Japan would intervene in foreign exchange markets regardless of cost. In another sign of determination the Bank of Japan also abandoned its usual practice of buying dollars secretly from banks. It blatantly purchased the dollar through brokers so currency dealers clearly knew of its presence in the market, dealers said. The bank’s activity pushed the dollar to 158.20 yen in Tokyo at midday from 157.55 yen in New York, but did not convince the market to start

buying the UX currency, dealers said.

Mr Miyazawa said the two factors made the current foreign exchange movements troublesome for Japan. He said late last year that Japanese business needed a stable dollar around 170 yen, but when pressed by reporters he would not say that the currency rates should actually be at that leveL The dollar traded in Tokyo at 1.9212 marks at midday against 1.9145 in New York. Earlier, in New York, the U.S. dollar closed lower on Thursday (early yesterday, N.Z.) as the project of a revaluation of the Deutsche mark within the European Monetary System continued to draw funds into the West German currency. Dealers said dollar sellers were encouraged by the comment of the U.S. Treasury Secretary, Mr James Banker, that the U.S. unit’s decline has been orderly and would not rekindle inflation. The dollar ended at 1.9140/ 50 DM, down more than a pfennig from its previous finish of 1.9275/85 DM. The dollar started to slip against the mark in the late morning trade as some believed that European central banks were intervening more modestly against the burgeoning mark than in recent days, dealers pointed out That view buoyed the mark against a dollar already on the defensive by expectations of lacklustre U.S. economic growth. “There is a lot of question whether the EMS realignment can be delayed until after the West German elections on January 25,” a dealer with a major American bank said.

“Without a realignment the central banks will have to keep intervening and that win be very costly,” he added, noting that dealers have estimated the Bank of France sold four billion marks on Tuesday. The dollar closed in. America at 1.6030/40 Swiss francs, down sharply from 1.6205/15, and at $Can1.3692/ 97, off Slightly from 14707/ 12. Meanwhile, sterling rose on the back of a weak dollar to. $U51.4775/85 from 1.4720/30. But the pound slipped to 2.829 DM from 2437. According to Morgan Guaranty Trust Co, the dollar’s trade-weighted value at midday was 0.4 per cent above average market rates in 1980-82, down from 0.6 per cent the previous day. In Sydney, the Australian dollar finished quietly steady at $U50.6665/70 after gaining support earlier from a weaker U 4. dollar and capital inflow. In local trading the dollar failed to maintain early momentum after opening higher at $U50.6660/65 from It previous local close of $U50.6640/45.