Kiwi sharply down on lower U.S. dollar

Press, 14 January 1987, Page 28

Kiwi sharply down on lower U.S. dollar

PA Wellington The New Zealand dollar ended sharply lower yesterday after encountering heavy selling pressure once it rose above the important 5U50.5400 level on the foreign exchange market The unit closed at 0.5328/ 35, against the session’s high of 0.5415 and a 0.5385/92 start Dealers said the market was initially mildly bullish but some large sell orders started a fall that gathered momentum once stop-loss orders were triggered. The unit would ease back further overnight but some dealers predicted a slight correction with a small bounce upwards. Dealers said the Kiwi dollar was bought up to the day’s high in early trading with some bullishness among interbank traders and offshore buyers. However, they said once the resistance was seen to be very strong the market turned. “A lot of people were talking it up, but all the natural business was on the other

side,” one dealer said. The trade-weighted index was fixed at 64.3 at 3 p.m. down from 64.8 this morning. On the cross rates, the New _ Zealand dollar was worth sAusto.Bo7, 1.03 marks, 36.4 p, 85 yen, 0.86 Swiss francs and SHK4.IB. In New York, the U.S. dollar plunged to its lowest level in over six years against the mark, as its fall continued unabated after the weekend realignment of the European Monetary System (EMS). The dollar closed at 1.8960 marks, down more than two pfennigs from Friday’s New York close of 1.9180 marks. The price was the lowest since November, 1980, when the dollar traded as low as 1.8810 marks. “The dollar’s like a barrel without a bottom,” commented Martin Rieben, chief dealer with Union Bank of Switzerland. He sees a rate of 1.75 marks within two months.

The all-time low for the dollar is 1.7062 marks, hit in January 1980.

The dollar closed at 157.55 yen and 1.4865 against sterling. The British pound is not in the EMS. - Dealers said the EMS realignment might increase hopes of a US.-West German economic co-operation pact, which would include a cut in the West German discount interest rate.

. But these hopes did little to stem the continued decline of the dollar on Monday because, even if such an accord was struck, it was unlikely to staunch pressure for a further fall in the dollar, analysts and dealers said.

“There could be a German discount rate cut in February or March as part of a public relations exercise with (U.S. Treasury Secretary James) Baker, but it wouldn’t be enough,” said David Hale, chief economist at Kemper Financial Services. Analysts said recent comments by Baker seemed to be tailored towards talking the dollar down to such levels that West Germany would be forced to stimulate its econ-

omy. But they noted that the dollar still had a long way to go against the mark. “The mark would really have to increase before the Germans panic and reconsider their policies,” -said Steve Cerier, a foreign-ex-change analyst with Manufacturers Hanover Trust Company. A strong mark hurts German exports. Far from lowering interest rates, the inflation-sensitive Bundesbank has been nudging money market rates higher recently in a bid to slow down above-target money-supply growth. This policy has not pleased Washington which wants Europe to spur economic growth and thus suck in more U.S. imports. The continuing decline of the dollar had little effect on Wall Street on Monday, as stocks maintained their rousing welcome to the new year. The Dow Jones industrial average rose 3.51 points to another all-time high of 2009.42.

erated in the recent 110-point-plus rise.