Kiwi still well bid

Press, 26 February 1987, Page 25

Kiwi still well bid

PA Wellington The New Zealand dollar finished well-bid after fluctuating in a narrow band in mixed trading during the session. The local currency closed at U50.55.29/36c against its 55.28/35C start and 55.13/20C finish on Tuesday. It traded between around U555.20C and 55.40 c during the session.

Dealers said they expect the local unit to slowly rise and any correction will be small. Firm local interest rates and a rise in the Australian dollar this session combined to support the local unit. Resistance exists at U555.40c with 55.80 c a major resistance point above that level, dealers said.

The Australian dollar finished at U567.35/40c from U566.90/95C at the open and U566.83/90C at the close on Tuesday.

The Reserve Bank trade weighted indek closed at 65.6, unchanged from its opening yesterday, and up from its close at 65.5 on Tuesday. A foreign exchange dealer said the accord between six major western nations reached at the week-end has had a spinoff effect on "third" cur-

rencies such as the New Zealand dollar.

The six agreed to foster stability in their exchange rates at around present levels.

The agreement had reintroduced an element of intervention, making freefloating currenices like the New Zealand dollar more attractive for overseas investment, he said.

As a consequence, there had been buying support for the New Zealand dollar offshore,, particularly from Australia and Hong Kong;

But the main reason behind the continuation of this year’s firming trend remains high interest rates, which yesterday averaged 23.5 per cent for call.

One dealer said the higher exchange rate was “not all bad”.

“The higher exchange rate will reduce offshore borrowing costs,” he said. And a US55c kiwi may impact favourably on the Consumers Price Index for the March quarter because of the effect it has on major imports, such as oil. In New York on Tuesday (early yesterday NZ time) the U.S. dollar closed mostly lower after a quiet day’s trading, but dealers said the decline

was not significant and that the market was still looking for fresh factors to put an end to the recent spell of sideways trading. After starting at 1.8385/ 95 Deutsche marks, the dollar edged up but could not pierce resistance at 1.8450.

This prompted profittaking, which was sustained during the afternoon by continued worries about the heavy exposure of U.S. banks to Brazil and other troubled Latin American debtors. By the end of the day, the dollar had dropped to 1.8308/ 18dm compared with 1.8395/05 on Monday.

The dollar fell to 1.5460/70 Swiss francs from 1.5545/55 but wound up little changed at 153.70/75 yen compared with 153.65/75.

Despite the afternoon sell-off against the mark, dealers said the market was treading gingerly for fear of triggering central bank intervention in support of last week-end’s agreement to foster currency market stability around current levels.

“The market is trading the chart points. People are scared of the Group of Six and central bank intervention.” a trader said.