$US slide continues

Press, 18 December 1989, Page 13

$US slide continues

NZPA-Reuter New York The United States dollar continued its slide on Friday (early Saturday, New Zealand time), closing lower after an unexpectedly sharp widening in the United States trade deficit for October. Traders predicted the United States currency, which closed at its lowest level against the Deutsche mark since late November of last year, is poised for more losses, especially against the Deutsche mark. "It’s going down,” predicted David Wilson, of Girozentrale, New York. “I see no reason at this point in time for the Deutsche mark to stop appreciating.” The dollar closed at 1.7175/85 Deutsche marks, down from 1.7332/ 39 on Thursday. And it ended at 144.00/10 yen, down from 144.13/18.

Dealers look for a renewed test of 1.7000 Deutsche marks this week, with some predict-

ing the dollar may well fall below that level. Paced by a 5.1 per cent rise in imports — to a record $U541.21 billion - the trade deficit widened to SUSIO.2O billion in October from a revised gap of SUSB.SI billion. Economists had forecast a shortfall of SUSB.97 billion, so the actual figure produced an immediate drop in the dollar of about a pfennig. That slide was halted, however, after dealers covered short positions. But the dollar received a further blow from news that United States producer prices unexpectedly fell 0.1 per cent last month. The drop — which was in contrast to forecasts of a gain of 0.2 per cent — backed the view that United States interest rates are headed lower, a development that would trim the return on dollar investments. The Federal Reserve’s policy arm, the Federal Open Market Committee,

meets over the next two days, and some analysts believe the central bank will agree then to loosen credit further to pump new life into the sagging economy. The dollar did get a brief respite after news Panama’s national assembly had declared the country was in a state of war with the United States. The news prompted a brief flurry of dollar buying because of the U.S. currency’s “safehaven” status. But dealers said the dollar soon ran into a wall of resistance at around 1.7280/90 Deutsche marks, ending its gains. Sterling closed at $U51.6025/35, up slightly from SUSI.6OIO/20. But against the Deutsche mark the pound slipped, ending at about 2.7540 Deutsche marks versus 2.7763. The dollar closed at 1.5475/85 Swiss francs, down from 1.5615/25.