N.Z. dollar sell-off on P.M. comment

Press, 25 January 1989, Page 25

N.Z. dollar sell-off on P.M. comment

PA Wellington The New Zealand dollar closed yesterday at U561.92/02C after comments by the Prime Minister, Mr Lange, sparked a sell-off. The kiwi was traded as low as 61.75 c, but recovered some ground before the close. It opened the day at U562.23/33C. Dealers said it may fall again overnight as offshore markets digested the Prime Minister’s statement that New Zealand “could live with” lower exchange rates. It fell also against the Australian dollar, being Aust7o.37c on the cross, against 71.52 c.

Other cross rates were 1.1324 Deutsche marks, 34.81 pence, 78.578 yen and 0.9568 Swiss francs. The Reserve Bank’s index was at 58.7 at 3 p.m., against 59.1 at 9 a.m. and 59.9 at 3 p.m. on Monday. In Sydney the Australian dollar closed higher, edging just under USBBc on book-squaring at day’s end after a strong early

performance against a weaker U.S. dollar, dealers said. The dollar ended at U587.96/01C — off the day’s local peak of 88.10 c amid reports of Reserve Bank sales. This was well up from Monday’s 87.57/ 62c.

Dealers said the upward pressure on the Australian dollar was set to continue, especially against a weaker U.S. dollar. The U.S. dollar finished lower in Sydney at 1.8278/87 Deutsche marks and 127.00/05 yen, from Monday’s 1.8403/13 and 128.10/20. The downward pressure on the U.S. dollar has followed heavy central bank sales in recent days, and moves by some European countries to raise interest rates. The U.S. dollar had closed at 1.8305/15 Deutsche marks and 127.40/50 yen in New York.

“The U.S. dollar’s weakness is set to continue on the central bank interven-

tion,” one dealer said. Others agreed. “We are still looking for further downside as the market continues to get hurt buying U.S. dollars,” Citibank said in a commentary. “The central banks are wielding a big stick.”

The Australian dollar is expected to test 1987’s highs of U588.35c but will face Reserve Bank, as well as nervous corporate, selling at the higher levels, dealers said. It is already travelling at September, 1985, highs on the Reserve Bank’s trade-weighted index. It closed yesterday at 65.5 Against other currencies, it eased to 1.6080/93 Deutsche mark from 1.6103/21 and at 1.3591/07 Swiss francs from 1.3647/ 72 and 111.60/75 yen from 111.90/05. It firmed to 49.47/52p from 49.29/ 35p.

It was sharply higher against a weakened New Zealand dollar at $NZ1.4151/82 from $NZ1.3928/58, amid sharp falls in New Zealand interest rates.