$US up after early rally

Press, 11 September 1989, Page 31

$US up after early rally

NZPA-Reuter New York The U.S. dollar closed higher on Friday (early Saturday N.Z. time) after rallying in afternoon trading amid unfounded rumours that UK Chancellor of the Exchequer Nigel Lawson had resigned and that Soviet leader Mikhail Gorbachev had died.

The dollar also rose on a report quoting a Swiss National Bank official saying the dollar was likely going higher. But Douglas Madison of the Bank of America downplayed the gains, saying: “I don’t think this should be construed as a huge amount of buying. The market has thinned considerably.”

The dollar ended at 1.9950/57 Deutsche marks, up from 1.9785/90 at Thursday’s close, and at 147.18/25 yen, up from 146.60/67. The Lawson rumour, later denied by the UK Treasury, wove into the afternoon market, causing sterling to drop below a crucial support of $U51.5400, dealers said. Dollar buying against other European currencies was also prompted, they added. Sterling ended the day at $U51.5370/80, down from $U51.5520/30 at Thursday’s finish, and the dollar closed at 1.7240/50 Swiss francs, up from 1.7065/75. This was followed by the published comments of a Swiss National Bank official, who also said central bank intervention may only have limited impact. Due to a dearth of fresh news, short positions were squeezed, dealers said.

Later, talk that Gorbachev had died further bolstered the dollar, dealers said. One trader said the market was looking for anything to trade on.

The White House discounted the rumours. When asked about rumours regarding Gorbachev’s health, Presidential spokesman Marlin Fitzwater, travelling with President Bush in New Orleans, said: “As far as we know, he’s in fine health.”

The dollar had been drifting downward in early trade, hitting lows of 1.9760DM and 146.05 yen. There was talk of discreet dollar sales by the Federal Reserve in the morning, with some dealers saying it may have occurred at 1.9840DM. Dealers could not confirm intervention, but said it was unlikely the dollar could have fallen so much on its own.

While 2.00DM and 148.00 yen were dollar topside targets, supports at 1.9720/1.9680DM and 146.00/145.80 yen were expected to be solid, dealers said. The dollar ended at sCanl. 1875/80, up from 1.1852/57 at Thursday’s finish.

Morgan Guaranty Trust Co said the dollar was 5.3 per cent below its 1980-82 trade-weighted average rate at noon on Friday, against minus 5.1 per cent on Thursday.