$NZ firms to 54.3 U.S. cents

Press, 4 February 1987, Page 43

$NZ firms to 54.3 U.S. cents

PA Wellington New Zealand exporters won no respite on the Wellington foreignexchange market yesterday, as the high interest rates continued to keep the kiwi dollar up. . The New Zealand dollar finished well-bid at $U50.5430/37 from its 5U50.5418/25 start. Interest rates, which reached 29.65 per cent for overnight money and 24.75 per cent for 90-day commercial bills, were attracting support for the currency, dealers said. However, trade was lacklustre.

“It is just too expensive to sell at the moment,” a dealer said.

“It is underpinned by high domestic interest rates, a firm Australian dollar, and the prospect of the settlement of offshore bond issues (New Zealand dollar denominated),” another dealer added.

Dealers’ opinions about direction varied. Some said the unit would continue to rise today, while others said the market would correct downward.

“The market is long. We could see a good shake-out today although the general trend is up,” one dealer said.

Others said the unit would trade in a tight range between 54.2 and 54.5 U.S. cents.

At 3 p.m., the Reserve Bank trade weighted index was fixed at 64.8, unchanged from its 9 a.m. fix.

In Sydney yesterday, the Australian dollar fin-

ished near its day’s highs at $U50.6635/40 after Asian demand led to late short covering by local operators, dealers said. It opened higher at $U50.6610/70 from Monday’s $U50.6604/09 finish. Traders said the local dollar attracted early selling pressure from local corporate traders, but Japanese demand for Australian shares and bonds lifted the dollar through 0.6620 in late trading. The Australian dollar ended at $NZ1.2194, compared with its opening of 5NZ1.2200. In North America on Monday (early yesterday, New Zealand time) the United States dollar ended on a soft note after improved American trade data failed to persuade the currency market that world trade imbalances could be eliminated without a further dollar depreciation, dealers said.

“The trade numbers were good' but this trend would have to be sustained for a couple of months before anyone would be convinced,” a dealer at a leading bank said.

The dollar closed at 1.8075/85 Deutsche marks after rising to 1.8335/45 DM on Friday on a narrowing of the United States trade gap to SUSIO.7 billion in December from $15.4 billion in November. The dollar also fell to 152.50/60 yen and 1.5235/ 45 Swiss francs from 153.70/80 and 1.5460/80 respectively at Friday’s close.

Later yesterday (New Zealand time) the United States dollar eased in quiet trading in Asia. It fell to 1.7972/82 DM and 152.26/36 yen.

The euphoria of Friday’s strong trade number and the ensuing dollar rally quickly evaporated in Asia on Monday. Traders took notice of a warning by the Secretary of the United States Treasury, Mr James Baker, that the narrowing in the December trade gap did not necessarily indicate a downward trend.

The dollar was also undermined by reports, quoting American and Japanese officials as saying that a much rumoured "Group of Five" Meeting would not take place at the week-end. "Everyone had assumed that there would be a G 5 meeting at which they would try to make sure the dollar does not go down any further,” said a trader. “Once the threat of a meeting was removed, it was a good opportunity to sell again.”

The G 5 comprises Finance Ministers and central bank officials from France, Japan, Britain, the United States, and West Germany.

The currency market received another excuse to offload dollar holdings in early trading when Mr Paul Volcker, chairman of the Federal Reserve Board, gave warning about the potential inflationary consequences of the dollar’s decline but stopped short of declaring that it had fallen far enough. The dollar hit its low point of the day — 1.8030 DM — around the closing of the European markets as traders, who had taken up long positions on Friday, decided to take their profits in the absence of any follow-through demand.