Kiwi holds as SUS soars

Press, 30 March 1989, Page 21

Kiwi holds as SUS soars

PA Wellington The New Zealand dollar reaped the benefit of a weakening in the currencies of its major trading partners on the Wellington foreign-exchange market yesterday. The only currency the kiwi fell against was the buoyant United States dollar.

The kiwi closed at U561.40/50C, compared with U561.72/82c at the close on Tuesday.

The Reserve Bank’s tradeweighted index rose to 61 from Tuesday’s 60.1.

The yen continued to lose ground yesterday in a trade off with- the United States dollar, dealers said. A surge in U.S. interest rates also signalled troubled times ahead for the New Zealand dollar, the interest-rate differential between the two countries continuing to narrow.

“We have seen the impact interest rates have on a currency but this time the boot is on the other foot,” a dealer said.

The kiwi made ground against the pound yesterday as the British currency dipped ahead of trade figures due out overnight.

The Australian currency was in a commodity-induced tail-spin, both gold and oil prices having eased overnight, dealers said.

On the cross rates, the kiwi finished at Aust7s.7oc, 1.16 Deutsche marks, 36.39 p, 81.92 yen, and 1.01 Swiss francs. In Sydney yesterday the Australian dollar continued to drift lower against the surging American currency, bouncing in jittery offshoredriven trade. The Australian dollar closed at U581.19/26c, compared with U582.04/09c on Tuesday, and at 5NZ1.3201/31, compared with $NZ1.3219/48. The currency slipped to 61.7 points on the Australian Reserve Bank’s tradeweighted index from 62.0 in morning and 62.2 on Tuesday night. In New York on Tuesday

(early yesterday, N.Z. time), the American dollar closed at seven-month highs against the mark after shrugging off four rounds of intervention by the. Federal Reserve System and dollar-selling by eight other central banks.

Dealers said the currency, powered by expectations of further rises in American interest rates, was poised to breach 1.9 Deutsche marks on Wednesday (early today, N.Z. time). That is widely believed to be the top of its range against the mark in a pact agreed by the Group of Seven leading industrial nations.

The dollar climbed more than a pfennig to finish at 1.8955/65 Deutsche marks, compared with 1.8830/40. It climbed to 133.20/30 yen from 132.65/75 at Monday’s close.

The dollar received a strong boost from the U.S. Treasury Secretary, Mr Nicholas Brady, who said he was in total agreement with

the Fed’s inflation-taming policy.

“His remark confirmed the market's feeling that the White House and the Fed are not opposed to a stronger dollar, if it is the by-product of the fight against inflation,” Mr Hubert Pedroli, of Credit Suisse, said.

“The dollar’s fundamentals are still very positive,” Mr William Arnold, of Chemical Bank, said. “The interest-rate differentials are wide, and rising (U.S.) inflation argues for firm monetary policy — all these things support the dollar.”

The market’s drive to push the dollar higher encountered quick opposition from the monetary authorities. The Fed and the central banks of England, West Germany, France, Austria, Switzerland, Belgium, Italy, and Spain intervened. Dealers estimated they sold around SUS2OO million altogether — a typical sum for a concerted intervention