FUTURES Diving kiwi pumps adrenalin

Press, 15 February 1986, Page 24

FUTURES Diving kiwi pumps adrenalin

The New Zealand dollar’s one-day dive on Thursday gave futures speculators their money’s worth of adrenalin. U.S. dollar futures contracts rocketed, with gains of almost $2OOO per contract for those short (with selling positions), while those long (buying position) lost the same amount. Some Auckland traders with the nerve to take buy contracts on Thursday made money as the U.S. dollar weakened overnight (N.Z. time). One Auckland broker is said to have bought about 60 contracts.

The kiwi dollar tumbled two cents on Thursday but bounced back to be done only 1c at the week-end. The drop was attributed to a large offshore order, but local traders climbing on the band-wagon and exporters withdrawing orders from the market contributed, said Dr Brent Layton, futures manager of John Marshall and Company, Ltd, Christchurch.

Futures prices rocketed up on heavy volume of 167 lots, rising nearly 400 points.

“In the short term the outlook is for the kiwi dollar to remain firm, although periodic sell-offs are a distinct possibility, as at these levels there is some nervousness about the currency. High interest rates and strong demand from exporters should hold the unit up,*’ said Dr Layton, adding that the medium term outlook was bearish.

Mr Geoff McDonnell, futures manager of Mair Astley, Ltd, said buyers of the Kiwi dollar crept cautiously back into the market yesterday.

Fundamentals such as high interest rates, the weak U.S. dollar, and some incentives for exporters to repatriate funds before March 31 should help the kiwi dollar retain

its strength in the short term.

With offshore bidding interest in the stock tender and its result confirming that interest rates will remain firm in the short term, we would look to the kiwi dollar showing resilience to any further sell-offs,” Mr McDonnell said.

Mr Barry Knutson and Mr Guy Morgan, of Marac International. Futures, Auckland, said: “We see the crucial level as 52.50. A close below here would leave the kiwi back inside the trading range within which it had languished over Christmas.

“We view the fall on Thursday as a technical correction, and the contract as a sell at current levels. We remain rather surprised at the vigour of the decline, which was probably compounded by nervousness about the comments of a prominent Wellington economist on the New Zealand deficit.” Interest rates The Interest-rates (PCP) indices traded in a narrow range through the week, said Mr McDonnell of Mair Astley. Some traders were showing sings of frustration at the general lack of direction of the PCP contract and were closing their positions on it to open positions on the lucrative contract "Sentiment is that the New Zealand Government will nurse the business community through what is alleged will be a very difficult run up to March 31.”

Dr Layton, of Marshall’s said the results of the February Government stock tender did not have an impact on the futures market as while rates were higher, they were in line with what the market

was expecting. The money market and futures traders were still awaiting resolution about how easily the system would handle the tax drain. The statement expected next week on the Budget deficit and Tuesday’s T-bill tender results were the news likely to influence the market

Giving their usual chartistoriented view, Mr Knutson and Mr Morgan, of Marac International Futures, said the PCP made a half-hearted rally into the mid-range of the triangle within which it had traded so far this year. At noon yesterday there were signs of a break to the downside from this on bar charts, but not on some point and figure charts. “We expect this to break to the down but see that downside as limited to about 7500 basis March, at which point upon some hesitation we would be looking to buy the contract as we do not have much confidence that less than 7500 will be sustained. Rates firmed somewhat before yesterday’s tender at which higher rates were paid; this also suggested a test of 7500, said Mr Knutson and Mr Morgan. Wool Prices generally eased over the early part of the week under pressure from the firmness of the kiwi dollar and lower auction prices, but bounced late in the week when the kiwi dollar tumbled and auction prices rose, said Dr Layton, of Marshall’s. “Unless the kiwi strengthens very sharply futures are unlikely to drop significantly as there is buying interest from trade sources apprehensive about a late season squeeze in the wool market,” Dr Layton said. Mr McDonnell, of Mair Ast-

ley, agreed on the effects of fluctuating exchange rates. "Futures prices move in unison with the fluctuations* of U.S. dollar/N.Z. dollar exchange rate. “Keen demand persisted at auction ' for well-prepared, good coloured wool, Mr McDonnell said. “There appears to be good buying support on futures around yesterday’s closing levels, the market taking the view that auction prices next season should be high because the exchange rate would be more favourable for the wool industry. SUS CONTRACTS Mth Open H/L Last Vol Feb. 1.8860 .8985/670 .8670 50 Mar. 1.9100 .9100/750 .8750 37 Contracts traded: 87. Open positions at February 13:

Feb. 361, Mar. 88, Jun. 3, Sep. 2,

Contracts traded: 219. Open positions at February 13: Mar. 1100, Apr. 31, May. 33, Jun. 119, Sep. 73, Dec. 17, total 1673 (up 23).

Open positions at February 13: Mar. 129, May 353, Aug. 198, Oct. 211, Dec. 217, Jan. 225, Mar. 313, May 219, Aug. 40, total 1905 (down 2).

total 454 (up 98). COMMERCIAL BILLS Mtn Open H/L Last Vol Mar. 7635 635/610 624 141 Apr. 7700 700/690 700 41 May 7790 790/785 785 7 Jun. 7865 865/865 865 7 Sep. 7850 850/850 850 9 Dec. 8000 8000/00 8000 7 Mar. 7975 975/975 975 7,

WOOL FUTURES Mth Open H/L Last Vo! Mar. 492 492/492 492 3 May 506 . 507/506 506 27 Aug. 526 526/524 524 3 Contracts traded: 33.

N.Z. FUTURES MARKET WEEK ENDED February 14 Trading Traded prices Total Open months This week To i date this cont’s SUS High Low Last High Low week Feb ’86 1.9695 1.8300 1.8670 2.0780 1.8125 302 361 Mar ’86 1.9100 1.8450 1.8750 2.05101.8315 154 88 Apr ’86 1.96501.9650 Jun ’86 2.10051.9350 3 Sep ’86 2.1890 2.0000 2 Dec ’86 2.08802.0215 Totals 456 454 PCP Feb ’86 7635 7600 7620 8143 7485 222 0 Mar '86 7655 7600 7624 8120 7490 514 1100 Apr ’86 7720 7690 7700 7790 7630 135 331 May ’86 7810 7785 7785 7810 7785 42 33 Jun ’86 7950 7865 7865 8225 7800 12 119 Sep ’86 7880 7850 7850 8219 7850 16 73 Dec ’86 8000 8000 8000 8299 8000 8 17 Mar ’87 7975 7975 7975 7975 7975 7 0 Totals 956 1673 WOOL Mar ’86 492 490 492 565 450 16 129 May ’86 509 500 506 571 456 49 353 Aug ’86 526 518 524 576 474 ' 18 198 Oct '86 523 520 521 571 474 12 211 Dec ’86 524 520 521 571 475 30 217 Jan ’87 528 520 523 568 474 29 225 Mar ’87 530 524 528 555 480 23 313 May ’87 338 530 531 562 486 30 219 Aug ’87 550 540 544 553 540 22 40 Totals 229 1905 Tenderable stock: 644 bales. 35F2D quotes — 492 in Christchurch yesterday.