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FED EXPECTED TO SET CUSTOMER zulchzulu The Federal Reserve is expected to intervene in the government securities market to supply temporary reserves indirectly via customer repurchase agreements , economists said . Economists expect the Fed to execute 2 . 0 - 2 . 5 billion dlrs of customer repos to offset pressures from the end of the two - week bank reserve maintenance period today . Some also look for a permanent reserve injection to offset seasonal pressures via an outright purchase of bills or coupons this afternoon . The Federal funds rate opened at 6 - 3 / 8 pct and remained at that level , up from yesterday ' s 6 . 17 pct average .

BANK OF JAPAN DETERMINED TO KEEP EASY MONEY POLICY The Bank of Japan bought 100 billion yen in certificates of deposit ( CDs ) via repurchase agreements today to show its determination to maintain an easy money policy , central bank officials said . " Today ' s CD buying operation was designed to seek an announcement effect , in which we would reassure the market of the fact that we have not changed our policy stance zulchzulu a senior central bank official told Reuters . The bank also bought 400 billion yen in two - month commercial bills to smooth out tight credit conditions in the interbank market today , the officials said . The central bank was concerned about growing market expectations of higher interest rates , which were in part responsible for the recent plunge in stock and yen bond prices , the officials said . But money traders said the market generally shrugged off the bank ' s CD operation because it was small and at a rate far below prevailing market rates . The rate on the key three - month CDs in the primary market was 4 . 08 / 00 pct , while the bank ' s bid was 3 . 75 pct , they said . The bank ' s bill buying operation also had little impact because it was regarded as a routine operation , they said . The money traders said they regarded the central bank ' s CD buying operation as simply a gesture to live up to Japan ' s pledge to guide interest rates lower and stimulate the economy . " We did not expect the central bank to ease its credit grip any further zulchzulu a bank manager said , adding that the prevailing market expectation of higher rates will remain . " If this is the case , the three - month CD rate will stay above four pct for the time being zulchzulu he said .

BRITISH MINISTER SAYS HE WARNED TOKYO OF SANCTIONS A British minister said he had given the Japanese government a clear warning of sanctions against Japanese companies if Tokyo did not allow more access to its internal markets " and it was clearly understood zulchzulu Corporate Affairs Minister Michael Howard said on his return from a visit to Japan he thought the Japanese were beginning to appreciate the need to be " fair and open " about access to their own markets . At an airport news conference Howard denied opposition charges that his trip had been a failure because he had returned empty - handed . " I did what I set out to do . I was sent to deliver a clear message to the Japanese government , and I delivered it very clearly , and it has been clearly understood zulchzulu Howard said that under the Financial Services Act the govenment had considerable flexibility in taking sanctions against Japanese companies and finance houses operating in Britain . " It is not simply a question of withdrawing or refusing operating licences . We can ban firms from certain countries from carrying out certain kinds of business , while allowing them to carry out other kinds zulchzulu " I hope we don ' t have to use these powers , but I made it clear in Japan that if our timetable isn ' t met , we shall use them zulchzulu He said it would be unfortunate if Britain and Japan became involved in a tit - for - tat exchange , adding that Japan gained more than anyone else from an open trading relationship . " I think they are beginning to appreciate that if this relationship is to continue , it is very important for them to be fair and open about access to their own markets zulchzulu On the question of the British firm Cable and Wireless Plc & lt ; zulchzulu . L zulchzulu which is trying to win a significant share of telecommunications contracts in Japan , Howard said he had told the Japanese this

U . K . RESERVES LIFT HOPES OF FURTHER BASE RATE CUT The record 4 . 9 billion dlrs rise in U . K . Reserves in May to a total 34 . 7 billion has lifted hopes for a further cut in bank base lending rates after the June 11 general election , market analysts said . Sterling would have risen on the much better than expected number but for market nerves about the poll outcome , they said . But the weight of foreign currency and gold reserves now available to the authorities to support the pound should curb any market tendency to panic if U . K . Opinion polls show the ruling Conservative Party ' s lead slipping , they added . " We have been intervening to a very much greater extent than we have done hitherto zulchzulu Chancellor of the Exchequer Nigel Lawson said at a news conference today , commenting on the news of the record reserves rise . He put the U . K . Intervention in the context of the Louvre accord between leading industrial nations to stabilise the dollar , partly through direct intervention on foreign exchanges . " We have been playing a very full part ourselves zulchzulu he said . But market analysts see the recent upward pressure on sterling , and consequent need for official sales to damp down its rise , more in the light of local factors . Steven Bell , chief economist at Morgan Grenfell Securities , said that corporate money has been flowing back into Britain amid hopes of another Conservative government , after fears last autumn of a Labour election victory sent it flooding out . U . K . Portfolio investment is also returning , while foreign buyers see U . K . Growth propects and high bond yields as attractive . They will be strong buyers of U . K . Assets , notably equities , once the election is out of the way , Bell said . Analysts see this pressure as the main hope for lower interest rates

ITALIAN BALANCE OF PAYMENTS IN DEFICIT IN MAY Italy ' s overall balance of payments showed a deficit of 3 , 211 billion lire in May compared with a surplus of 2 , 040 billion in April , provisional Bank of Italy figures show . The May deficit compares with a surplus of 1 , 555 billion lire in the corresponding month of 1986 . For the first five months of 1987 , the overall balance of payments showed a surplus of 299 billion lire against a deficit of 2 , 854 billion in the corresponding 1986 period .

ASA SAYS EC zulchzulu POLICY ILLEGAL UNDER GATT The American Soybean Association ( ASA ) denounced European Community ( EC ) oilseed policies as illegal under the General Agreement on Tariffs and Trade , and threatened to make an unfair trade complaint if the EC does not remedy the situation . ASA Vice President James Adams told an ASA - sponsored Outlook 87 conference : " It will be filed unless the EC takes drastic and immediate steps zulchzulu " These subsidies are blatantly unfair and are GATT illegal , since they were established after the zero soybean duty was established in 1962 zulchzulu he said . The ASA ' s unfair trade petition against the EC would ask for an investigation and modification of EC oilseed policies to make the regime non - discriminatory . The EC in 1962 ruled all EC oilseed imports duty - free , in an effort to fill its oilseed needs . But EC oilseeds production has risen dramatically since then . The EC now guarantees oilseed prices to farmers above world market levels and is considering implementing a controversial oils and fats tax . The subsidies " are obvious attempts to circumvent the zero duty binding and that makes U . S . Farmers mad as hell zulchzulu Adams said . The ASA is confident the U . S . Congress will support its trade complaint , Adams said . The ASA also strongly opposes an EC proposal to tax vegetable and marine oils consumed in the EC , which will be considered by the EC Commission in December . U . S . Soybean world market share has declined 35 pct in volume and 40 pct in value since 1982 , primarily as a result of EC policies , Adams added . Lord Plumb , European Parliament President and a speaker at the conference , said the EC expanded oilseed production in 1973 when the U . S . Halted overseas sales of soy products .

zulchzulu SEES NO CHANGE IN MONETARY COURSE The Bundesbank sees no current reason to change monetary course , vice - president Helmut Schlesinger told Reuters in a telephone interview . Schlesinger was responding to questions following remarks yesterday by Bundesbank board member Claus Koehler and West Berlin state central bank president Dieter Hiss , which , dealers said , revived some speculation that German interest rate cuts may once again be under discussion . Schlesinger said he had no comment on the remarks of his two central bank council colleagues . But he added that the last central bank council meeting on April 2 had discussed the economic situation with a mood of " subdued optimism zulchzulu particularly influenced by the news brought by several state central bank presidents . " Much is going better than the impression gained by the public from the January figures , which have been in the meantime superseded zulchzulu he said . German January industrial output fell 3 . 0 pct after a decline of 0 . 9 pct in December . New industry orders fell 1 . 9 pct after they had been unchanged in December . Bank economists said that the two together showed the economy would either stagnate or contract in the first quarter of 1987 . Aside from the economic developments , Schlesinger added , a steady monetary course was important to hold the dollar / mark rate around current levels as Bundesbank president Karl Otto Poehl had said while attending the Washington World Bank / IMF meeting . Asked , however , if the Bundesbank could move to cut rates on repurchase agreements at the setting of the next repurchase tender , due next Tuesday , Schlesinger said , " Since the central bank council gives its opinion on this theme only every 14 days , this is hardly probable zulchzulu Responding to the question whether the Bundesbank had moved away from a policy of targetting monetary growth toward one of targetting currency rates , Schlesinger said he could have no comment on the subject while negotiations were still

Bank of France added money market liquidity at 7 - 3 / 4 pct - dealers Bank of France added money market liquidity at 7 - 3 / 4 pct - dealers

AQUINO SAYS MANILA WATCHING INTEREST RATES CLOSELY President Corazon Aquino said the Philippines was closely monitoring interest rates in the wake of Monday ' s record drop on Wall Street and steep declines in Manila and other Asian stock markets . " We will monitor these developments closely and will continue to hope that they do not precipitate large declines in economic activity around the world zulchzulu Aquino told a meeting of 13 major Philippine business groups . " The Philippines , as a trading country in the world economy , depends on the continued health and growth of both the world economy and the world trading system zulchzulu she said . The Manila Stock Exchange composite index plunged 105 . 49 points or 11 . 79 pct by the midday close to 789 . 54 , depressed by the record 508 point fall of the Dow Jones industrial average on Monday . " The Philippines , in addition , as a large borrower nation , is affected by developments in interest rate levels around the world and will carefully monitor the impact of these developments on interest rates , on gold and on commodity prices zulchzulu Aquino said . " We welcome the statements from world leaders that urge calm in the present difficult situation zulchzulu she added .

zulchzulu zulchzulu 6 . 1 BILLION MARKS IN TENDER The Bundesbank accepted bids for 6 . 1 billion marks at today ' s tender for a 28 - day securities repurchase pact at a fixed rate of 3 . 80 pct , a central bank spokesman said . Banks , which bid for a total 12 . 2 billion marks liquidity , will be credited with the funds allocated today and must buy back securities pledged on May 6 . Some 14 . 9 billion marks will drain from the market today as an earlier pact expires , so the Bundesbank is effectively withdrawing a net 8 . 1 billion marks from the market with today ' s allocation . A Bundesbank spokesman said in answer to enquiries that the withdrawal of funds did not reflect a tightening of credit policy , but was to be seen in the context of plentiful liquidity in the banking system . Banks held an average 59 . 3 billion marks at the Bundesbank over the first six days of the month , well clear of the likely April minimum reserve requirement of 51 billion marks . The Bundesbank spokesman noted that by bidding only 12 . 2 billion marks , below the outgoing 14 . 9 billion , banks themselves had shown they felt they had plenty of liquidity . Dealers said the Bundesbank is keen to prevent too much liquidity accruing in the market , as that would blunt the effectiveness of the security repurchase agreement , its main open - market instrument for steering market interest rates . Two further pacts are likely this month over the next two weeks . The Bundesbank is currently steering call money between 3 . 6 and 3 . 8 pct , although short - term fluctuations outside that range are possible , dealers said .

FED EXPECTED TO ADD RESERVES The Federal Reserve will enter the government securities market to supply reserves via either a large round of customer repurchase agreements or by overnight or possibly four - day system repurchases , economists said . They said the Fed has a fairly large add need and is likely to face the most reserve dislocations early in the new statement period started today as corporate tax payments swell Treasury balances at the Fed . Fed funds hovered at 6 - 3 / 4 pct after averaging 6 . 80 pct yesterday .

INDIA RELAXES RULES FOR EXPORT PROMOTION The Reserve Bank of India , RBI , announced new rules to allow exporters of 25 products to use foreign exchange up to 10 pct of their firm ' s total annual export earnings for export promotion abroad . The move is designed by the government to improve India ' s trade deficit . Products eligible for the new Blanket Exchange Permit Scheme include tea bags , cigarettes , coffee , leather , various textiles , chemicals , pharmaceuticals , plastics , engineering and electronic goods , ready - made garments , processed food , sports goods , fabricated mica and consultancy services . The scheme replaces current rules which allow different amounts of foreign exchange to be used only when firms attain a minimum annual turnover prescribed for each product . RBI said under the new rule , 16 other products will qualify , on a discretionary basis , for overseas promotional spending of not more than two pct of the freight - on - board value of annual export earnings . These include oil cakes , cereals , raw cotton , raw and semi - processed leather , gems , castor and sandalwood oil , psyllium husks and seeds , opium and various mineral ores . RBI said exporters of products not covered by either of the two groups will be eligible to use up to five pct of their freight - on - board value of their annual export earnings . Industry sources said the new entitlements , considerably higher than the previous limits , are also more flexible because holders of new permits no longer need to frequently apply to RBI for release of foreign exchange for export purposes .

BAKER SEEN WINNING GERMAN INTEREST RATES BATTLE The United States appears to have won a transatlantic battle by forcing the Bundesbank to trim interest rates , European economists said . But they added Washington set the stakes high by testing the limits of the Louvre accord while global stock markets were plunging . West German Finance Minister Gerhard Stoltenberg and U . S . Treasury Secretary James Baker reaffirmed their commitment to currency stability at a secret meeting yesterday in Frankfurt , according to official statements released late Monday . Only 13 hours after the statements were released , the Bundesbank reduced short - term interest rates by offering banks liquidity at a fixed bid rate of 3 . 80 pct , down from a 3 . 85 pct facility rate offered last week . While the two ministers were meeting with Bundesbank president Karl Otto Poehl , the central bank had also added money market liquidity repeatedly , signalling it did not want a strong rise in the tender allocation rate on Tuesday . " It ' s round one to the Americans , " said Richard Reid , senior European economist for brokers UBS / Philips and Drew in London . But Reid added , " We shouldn ' t forget that it has taken one of the biggest stock market crashes in decades to get the West Germans to cut their security repurchase rate by a 0 . 05 percentage point zulchzulu Over the weekend , criticism by Baker of earlier tightening of West German monetary policy led to a sharp dollar fall and fuelled speculation that the Louvre accord was no longer valid . Six leading industrial nations agreed under February ' s Louvre Accord to stabilise currencies and coordinate monetary policies . It has since been reaffirmed by the Group of Seven - the US , Japan , West Germany , Britain , France , Italy and Canada . The Frankfurt meeting on Monday soothed currency markets and the dollar gained over two pfennigs in after hours trading in New York . At the Frankfurt

SPANISH EMPLOYERS WORRIED BY HIGH INTEREST RATES The head of Spain ' s employers ' federation , Jose Maria Cuevas , said employers were worried about the government ' s monetary policies because high real interest rates were hampering investment . He told a news conference wage pacts signed so far this year were not endangering the government ' s five pct inflation target . The government ' s perceived need to control inflation by keeping a tight rein on credit was unnecessary , he said . High real interest rates were attracting an influx of speculative foreign capital which was undercutting the government ' s target for monetary growth , Cuevas said . Spain ' s most closely - watched measure of money supply , liquid assets in public hands , grew at an annualised rate of 17 pct in March , against 11 . 4 pct in December last year and a target range of 6 . 5 to 9 . 5 pct for 1987 . To combat this , the Bank of Spain has raised its call money rate 14 times so far this year , to 14 . 5 pct at present from 11 . 8 at end - 1986 . Cuevas said employers were heeding the government ' s call to hold wage increases to its five pct inflation target this year , with increases from salary reviews awarded last year and new wage pacts averaging 5 . 6 pct in the first quarter of 1987 . These agreements covered less than 40 pct of Spanish workers , Cuevas said , with the rest still in wage negotiations . He said Spain ' s current wave of strikes mainly affected the state sector , where the government is trying to impose its five pct wage ceiling . Cuevas said employers were also worried about the trend in Spain ' s foreign trade balance . The trade deficit in the first two months of 1987 totalled 233 billion pesetas , a 68 pct increase over the corresponding period last year . However , employers did not

FED SEEN ADDING RESERVES VIA SYSTEM REPOS The Federal Reserve is expected to enter the government securities market to supply reserves to the banking system via system repurchase agreements , economists said . Most economists said the Fed would execute three - day system repurchases to meet a substantial need to add reserves in the current maintenance period , although some said a more aggressive add via overnight system repos was possible . Federal funds opened at 7 - 5 / 8 pct and remained at that level late this morning , compared with an average effective rate of 7 . 55 pct Friday .

GERMAN BANKERS ' REMARKS REVIVE TALK OF RATE CUT Remarks by two leading central bankers sparked renewed speculation in financial markets that a cut in the West German three pct discount rate may be under discussion , currency dealers said . Bundesbank board member Claus Koehler said in a speech that monetary growth resulting from speculative capital inflows required cuts in interest rates . Separately , West Berlin state central bank president Dieter Hiss told journalists that the discount rate could fall below its lowest ever point of 2 . 75 pct . He made clear that he was not making a forecast on interest rates , however . Currency dealers here and in the Far East said the dollar gained slight background support from the speculation . But German dealers noted that the Bundesbank kept the 3 . 80 pct rate unchanged at which it offered liquidity to the money market this week , dashing some expectations that it may either offer lower fixed rate money or offer a reduced minimum rate and let the strength of banks ' demands set the allocation rate . It allocated 6 . 1 billion marks in new liquidity , much less than the 14 . 9 billion leaving the market as a prior pact expired . This further weakened sentiment the Bundesbank could move to a more accommodative monetary stance , dealers said . Koehler said in a speech in Surrey , England , speculative capital inflows may cause monetary growth , regardless of whether central banks intervened or exchange rates fell . " In other words , the monetary policy measures required are different from -- and sometimes diametrically opposed to -- those needed when the money stock is increasing as a result of mounting economic activity zulchzulu Though Koehler was known to be the most liberal of the generally monetarist Bundesbank board , his comments marked the first time cuts in rates had been concretely suggested as a counterpoint to overly strong monetary growth , dealers said . REUTER ^ M

zulchzulu WELCOMES U . S zulchzulu JAPAN AGREEMENT ON LOUVRE Bank of Japan governor Satoshi Sumita said he welcomed Monday ' s U . S . And West German joint confirmation of their commitment to the Louvre accord . Sumita said in a statement that world stockmarkets were excessively concerned about the economic future . The Bank of Japan will continue to adhere to a system of policy coordination based upon the Louvre accord of February , he said . The accord called for stability in foreign exchange rates . Exchange rates generally are regaining stability and the economies of industrialised nations are heading for a steady recovery , he said .

zulchzulu WARNS AGAINST FURTHER DOLLAR FALL Bundesbank President Karl Otto Poehl said a weaker dollar would be risky and a further appreciation of the mark would damage prospects for sustained West German economic growth . In a speech to the Institute of Contempory German Affairs here , Poehl said " It would be an extremely risky policy to aim for a further substantial decline in the value of the dollar to correct the trade deficit zulchzulu He said the United States could face a vicious circle of depreciation , inflation and more depreciation if it took that route . Poehl noted West Germany had already taken steps to meet U . S . Demands for greater stimulation of its domestic economy , accelerating tax cuts , cutting interest rates and tolerating above - target money supply growth . He said he would have been happy to have brought forward five billion marks of tax cuts now planned for January 1988 to the beginning of this year , but he said the government faced political constraints getting such measures through the upper house of the West German parliament . But there were also limits to the impact West Germany could accept on exports from a rising mark , he said . Poehl said West Germany relied on exports for about one - third of its gross national product , so a substantial erosion of export markets could not be offset by increasing demand at home . " A further appreciation of the mark could even be an obstacle to further growth zulchzulu he said . Poehl said the Bundesbank had tolerated rapid money supply growth last year because the country enjoyed low inflation and because external factors , including low oil prices and favourable terms of trade , had given some extra leeway . But Poehl said West Germany now faced a difficult dilemma over monetary policy . The underlying rate of inflation was now two pct , not the reported negative inflation rates last year , and West Germany was affected more than before by exchange rate developments . "

INTEREST RATES HURT U . S . MAY HOUSING SALES Sales of new single - family homes tumbled 14 . 9 pct in May from April levels because of higher mortgage interest rates , analysts said . " There should be another month or two of very weak new home sales but with interest rates stabilizing , sale of new homes should become more stable by mid - summer zulchzulu said economist Lawrence zulchzulu of Wharton Econometrics Inc . The drop in May , to a seasonally adjusted annual rate of 616 , 000 units , was the largest since January 1982 , the Commerce Department said . Interest rates on conventional mortgages bottomed out at about 9 . 08 pct in March and rose to about 10 . 7 pct in April , according to Stephen Roach , economist at Morgan Stanley . The effect was to freeze some potential new homebuyers out of the market , he and others said . " The rates moved very suddenly and were certainly unexpected by homebuyers zulchzulu said Cynthia Latta , an economist with Data Resources . " They were so startled , they wanted to hold back and see what would happen zulchzulu The drop in sales of new single - family home sales was sharper than expected , some economists said . " We fully expected a decline but the extent was more than we anticipated zulchzulu said James Christian , chief economist for the U . S . League of Savings Institutions . Christian said there was a sharp rise in May in sales of existing homes , which are generally less expensive than new homes . Latta of Data Resources said strong sales of new condominiums in the Northeast and on the West Coast were reflected in sales of existing but not new homes . Christian of the U . S . League of Savings Institutions said , " Underlying housing demand remains strong . I think the market is going to stabilize and give us a good second half zulchzulu Others were less optimistic , however

zulchzulu REMAINS INTACT FOR DEBT FUTURES The six basis point rise of the past month in U . S . debt futures may be extended next week by a series of U . S . economic reports , analysts said , as long as the dollar holds firm . " Interest rates have declined by approximately 50 basis points over the last month , largely over indications that inflation is not as high as people had feared and the narrowing U . S . trade balance , in nominal terms zulchzulu Samuel Kahan , chief financial economist with Kleinwort Benson Government Securities , said . Kahan said recent government reports have shown strength in the economy during the first quarter , but his concern is whether the U . S . economy will sustain that strength in the longer term . Weak U . S . economic growth could hurt the dollar , which has become more important to the direction of debt futures than the beneficial impact on interest rates of a sluggish economy . The median trade expectations for Tuesday ' s U . S . Consumer Price Index and Durable Goods reports are up 0 . 4 pct and down 1 . 5 pct , respectively . Meanwhile , the eight billion dlr drop in the M - 1 money supply announced this week was " surprising , much larger than expected zulchzulu according to Kahan . " Unless quickly reversed zulchzulu such a trend " will ensure that June M - 1 growth will be negative zulchzulu Kahan said . Taken in conjunction with M - 2 and M - 3 aggregates which Kahan said have " slowed to a crawl , below Federal Reserve Board annual targets zulchzulu the consequences could be a hint of economic weakness down the road , he said . Based on chart formations , T - bond futures may be poised for further gains , although the advance has been slowed recently , analysts said . September T - bonds " are up almost six points since about May 18

zulchzulu DEFENDS U . S . EXPORT SUBSIDY PROGRAM U . S . Agriculture Secretary Richard Lyng said the United States will continue its policy of subsidizing farm exports to regain lost markets until there is a global agreement to end such subsidies . In an interview with Reuters , Lyng also acknowledged he was troubled by the prospect that the export enhancement program ( EEP ) could prove so indispensable to boosting U . S . exports that the U . S . would have difficulty abandoning it . " Yes , I ' m troubled with that a little bit zulchzulu he said . " There ' s no question about it , the longer you feed the calf on the cow , the longer it is to wean it zulchzulu In recent months , USDA has offered subsidies on a growing list of commodities to an increasing number of countries . Lyng called U . S . and European Community export subsidies " just plain nonsensical as a long - term policy " and said he saw an end to the expansion of the EEP . " I ' m sure there ' s an end to the expansion , but we are doing this to accomplish our goal which is to regain the markets that we ' ve lost , to keep our products competitive and to let those , particularly the European Community , who , we are convinced , are the worst offenders in terms of the export subsidization , that we are prepared to continue to do this until we can come to some agreement to put an end to it zulchzulu he said .

BONN MINISTRY HAS NO COMMENT ON BAKER REMARKS The West German Finance Ministry declined to comment on weekend criticism by U . S . Treasury Secretary James Baker of recent West German interest rate increases . Baker said the U . S . Would re - examine the February Louvre Accord to stabilise currencies reached by leading industrial democracies . The rise in West Germany short term interest rates was not in the spirit of an agreement by these nations in Washington , which reaffirmed the Louvre pact , he said . A Finance Ministry spokesman , asked for an official ministry reaction to Baker ' s remarks , said he could make no comment .

KUWAITI DINAR RATES FIRM , AID WINDOW OPEN Interest rates on Kuwaiti dinar deposits held firm in scattered trading despite a Central Bank decision to revive limited funding lines , dealers said . The Central Bank , which last Tuesday shut a daily aid window through which it lent funds of up to one year , reopened the facility for three month money , which was available at seven pct , they said . It offered one month funds at seven pct through swap facilities , dealers said . Today ' s Central Bank action , combined with sales of dollars by some banks , helped ease a recent credit squeeze engineered by the monetary authority to stem a rush for the U . S . Currency arising from attractive U . S . Interest rates and Gulf tension , dealers said . However , as one dealer noted : " The market is still unsettled zulchzulu Overnight funds , bid at 20 pct at the outset of business , traded up to 30 pct before easing as liquidity dragged offers down to 10 pct by the close . Tomorrow - next , for which buy / sell quotes started at 30 , 20 pct , ended at 14 , eight . Spot - next was indicated at 8 - 1 / 2 , seven after opening bids of 10 . Dealers quoted one - week at eight , seven against an early 9 - 1 / 2 , 7 - 1 / 2 . One month rates were at the same level after trade at eight then 8 - 1 / 2 . Dealers quoted three months at seven , 6 - 3 / 4 pct and six - month to one year funds at seven , six pct . They reported offshore offers of overnight at 10 , tomorrow - next at eight and one year at 6 - 1 / 2 pct towards the close . The Central Bank fixed its dinar exchange rate steady at 0 . zulchzulu / 67 to the dollar , against yesterday

SAUDI RATES RISE AS BAHRAIN BANKS CAUGHT SHORT Saudi riyal interest rates rose as Bahrain - based banks scrambled to cover short positions , dealers said . Several Bahrain banks had been lending in the fixed periods and borrowing in the short dates , but today they found the day - to - day money in short supply , dealers said . " Everybody ' s stuck in the spot - next zulchzulu one trader said . Spot - next rose to as high as 6 - 1 / 4 , six pct from 5 - 1 / 4 , five pct yesterday , and the borrowing interest spilled over into the periods , with one month rising to around 6 - 3 / 16 , 5 - 15 / 16 pct from 5 - 15 / 16 , 7 / 8 pct yesterday . Three months edged up to around 6 - 9 / 16 , 5 / 16 pct from 6 - 7 / 16 , 1 / 4 pct , while six months was quoted a touch firmer by some banks at seven , 6 - 3 / 4 pct . Commercial banks quoted the spot riyal at 3 . 7500 / 04 to the dollar after 3 . 7507 / 09 yesterday .

zulchzulu SAYS CRITICISM NOT " ONE - WAY STREET " Finance Minister Gerhard Stoltenberg said he was surprised by recent criticism of West German economic policies voiced by U . S . Treasury Secretary James Baker but added that the criticism was not purely one - sided . Stoltenberg told the West German Trade and Industry Association ( zulchzulu ) that before a meeting with Baker on Monday , " There had been surprising notes of criticism ( from the United States zulchzulu He added . " Criticism is not a one - way street zulchzulu He did not elaborate , but Bonn has often called on the U . S . To reduce its federal budget deficit . Over the weekend Baker had criticised West German economic policies , saying that rises in domestic interest rates here were not in the spirit of last February ' s Louvre pact to stabilise currencies . Stoltenberg told the zulchzulu that his meeting on Monday with Baker had resolved differences between the two countries . At a news conference earlier on Tuesday Stoltenberg had declined to comment specifically on Baker ' s criticisms , but he had said that after three hours of discussions on Monday , " one remark or another has been clarified zulchzulu

CANADA TRADE RISE SEEN AS START OF RECOVERY Canada ' s trade picture has brightened considerably , underscoring economists ' predictions the sector would post a long awaited recovery this year . The federal government reported today that the monthly surplus soared to 1 . 25 billion Canadian dlrs in February , double January ' s 623 mln dlrs surplus and sharply higher than February 1986 ' s 189 mln dlr tally . " Hopefully it ' s the beginning of a trend zulchzulu said Richardson Greenshields of Canada Ltd economist Susan Clark in Toronto . Economists generally don ' t expect such large gains over the next months , but are looking for an upward trend throughout the year . " We thought the trade balance would improve ... over the year , and it certainly looks as if this morning ' s figure is indicative of that zulchzulu commented economist James Donegan at the Toronto securities firm of Midland Doherty Ltd . Statistics Canada reported the surplus was driven by a 23 pct gain in automobile product exports to a record 3 . 2 billion dls in the month . " Recovery in the automotive sector helped push the value of exports up by 5 . 9 pct in February zulchzulu the agency said in its monthly report . Total exports expanded to 10 . 44 billion dlrs from 9 . 85 billion dlrs in February , while imports slipped to 9 . 19 billion dlrs from 9 . 23 billion dlrs . Economists have predicted the 1987 trade surplus would end up three to five billion dlrs higher than last year ' s dismal 10 . 1 billion dlr total . In 1985 the surplus was 17 . 48 billion dlrs . Money market analysts said the positive trade news touched off a modest rally in the Canadian dollar , which rose to 76 . 85 U . S . cts on North American markets early this morning after closing at 76 . 58 cts Wednesday . The currency was hovering around 76 . 78 cts in

AUSTRIAN CURRENT SURPLUS GROWS IN FOUR MONTHS Austria ' s current account surplus grew to 11 . 0 billion schillings in the first four months this year from 8 . 2 billion in the same period last year , the National Bank said . In April , the current account recorded a deficit of 300 mln schillings compared with an 800 mln surplus in March and an 800 mln deficit in April , 1986 , the bank said in a statement . The trade deficit in the first four months fell to 16 . 4 billion schillings from 17 . 5 billion in the same period last year while in April the deficit was 4 . 1 billion compared with 6 . 9 billion in March and 3 . 6 billion in April , 1986 .

zulchzulu BALANCE OF PAYMENTS IN DEFICIT IN MAY Italy ' s overall balance of payments showed a deficit of 3 , 211 billion lire in May compared with a surplus of 2 , 040 billion in April , provisional Bank of Italy figures show . The May deficit compares with a surplus of 1 , 555 billion lire in the corresponding month of 1986 . For the first five months of 1987 , the overall balance of payments showed a surplus of 299 billion lire against a deficit of 2 , 854 billion in the corresponding 1986 period .

U . K . MONEY MARKET GETS 103 MLN STG HELP The Bank of England said it operated in the money market this morning , buying 103 mln stg bank bills . The central bank bought in band one 60 mln stg at 9 - 7 / 8 , in band two eight mln at 9 - 13 / 16 , in band three 26 mln at 9 - 3 / 4 and in band four nine mln stg at 9 - 11 / 16 pct . This compares with the bank ' s forecast of a 400 mln stg shortfall today .

FED EXPECTED TO SET CUSTOMER zulchzulu The Federal Reserve is expected to add reserves to the U . S . banking system by arranging a round of customer repurchase agreements during this morning ' s intervention period , several economists said . Some others , however , judged that the Fed has almost completed its reserve - adding requirement for the statement period ending on Wednesday and will not need to operate today . Fed funds were trading at 6 - 11 / 16 pct , compared with Friday ' s average of 6 . 63 pct .

zulchzulu HAS HAD CONTACT WITH G - 7 MINISTERS French Finance Minister Edouard Balladur has been in contact with several Finance Ministers from the Group of Seven leading industrial countries , in particular West German Finance Minister Gerhard Stoltenberg , to discuss the crisis on world markets , Finance Ministry sources said . They did not say whether the contacts had led to concerted action on the markets or merely an exchange of views . But they added that French ministry officials were continuing the contacts to exchange views on market performance .

20 - OCT - 1987 20 - OCT - 1987

LEBANESE POUND FALLS SHARPLY AGAINST DOLLAR The Lebanese Pound fell sharply against the U . S . Dollar again today with dealers attributing the decline to continued political uncertainty . The pound closed at 118 . 25 / 118 . 75 against the dollar compared to yesterday ' s close of 115 . 60 / 115 . 80 . " Political deadlock is reflected in the pound ' s position . There was more demand and less on offer in the market zulchzulu one dealer told Reuters . The pound , which was at 18 to the dollar in January , 1986 , has lost more than 30 pct of its international value over the past three months .

U . S . HOUSE PANEL VOTES TO SPEED UP CORN PAYMENTS The House Agriculture Committee voted to make approximately 2 . 8 billion dlrs of zulchzulu deficiency payments immediately instead of in the late fall . A similar measure was decisively defeated on the Senate floor last week . The bill , which passed by a voice vote , would allow so - called Findley payments to be made immediately rather than late this year . Payments for 1987 - 90 zulchzulu crops would not be changed . Because the bill would move 2 . 8 billion dlrs of spending into fiscal 1987 from fiscal 1988 , the measure is expected to meet stiff resistance in the full House .

ITALY DEFICIT NOT DUE TO LIBERALIZATION - MINISTER Italy ' s Foreign Trade Minister Mario zulchzulu , commenting on speculation in the Italian press , said a sharp balance of payments deficit in May could not be attributed to recent moves liberalizing the purchase of foreign securities . zulchzulu was reacting to suggestions that last month ' s overall 3 , 211 billion lire deficit , which compares with April ' s 2 , 040 billion surplus , could be linked to a May 13 decree abolishing obligatory non - interest - bearing deposits on foreign securities purchases . " The deficit can be better attributed to premature and delayed foreign trade payments and receipts ( leads and lags ) rather than capital outflow to portfolio investment zulchzulu zulchzulu said in a statement . Earlier today the newspaper La Repubblica cited remarks by the Bank of Italy , which announced the deficit for May and said it had been partly caused by " non - banking capital outflows zulchzulu " In practice , it seems that there has been a constant flow of capital to foreign securities or investments outside our borders zulchzulu said the newspaper . But the newspaper added that it was still not possible to say how far the move to abolish foreign securities purchase deposits had affected Italy ' s balance of payments .

JAPANESE OFFICIAL TAKES DATA TO MICROCHIP TALKS Ministry of International Trade and Industry ( MITI ) Vice Minister Makoto Kuroda leaves for Washington today with data he hopes will refute U . S . Charges Japan has violated a pact on microchip trade . A three - man Japanese trade team is already in Washington laying the groundwork for talks between Kuroda and Deputy U . S . Trade Representative Michael Smith aimed at persuading the U . S . Not to impose tariffs on certain Japanese products . But Kuroda said he is taking no new proposals . " I have nothing in my briefcase except an explanation of the current situation zulchzulu Kuroda told the daily newspaper Asahi Shimbun . Kuroda said the U . S . Decision was based on incorrect data and an exaggerated sense of MITI ' s power to control market forces . " The U . S . Has excessive expectations . To stabilise supply - demand relations which have been disrupted by excess inventories since 1985 will take some time zulchzulu he said . Kuroda also laid part of the blame for low U . S . Chip sales in Japan on a lack of effort by American firms here . He said if he fails in talks tomorrow and Friday to forestall sanctions , he will seek further talks with U . S . Trade Representative Clayton Yeutter . U . S . Officials said this week ' s talks are unlikely to delay imposition of tariffs .

FED ADDS RESERVES VIA OVERNIGHT zulchzulu The Federal Reserve entered the U . S . Government securities market to arrange overnight System repurchase agreements , a Fed spokesman said . Dealers said that Federal funds were trading at 6 - 3 / 8 pct when the Fed began its temporary and direct supply of reserves to the banking system .

FED SETS TWO - DAY SYSTEM zulchzulu The Federal Reserve entered the government securities market to arrange two - day repurchase agreements for system account , a spokesman for the New York Fed said . Federal funds were trading at 6 - 3 / 4 pct at the time of the direct injection of temporary reserves , in line with Friday ' s 6 . 72 pct average .

zulchzulu , zulchzulu AGREE RATE CUT NOT APPROPRIATE Prime Minister Yasuhiro Nakasone today agreed with Bank of Japan governor Satoshi Sumita that a further cut in the discount rate was not appropriate at present , central bank sources said . They told Reuters the two discussed the subject at a routine meeting . Sumita told Nakasone he did not feel a rate cut was appropriate and Nakasone expressed his understanding , the sources said . Currency dealers have speculated that Japan and West Germany might come under pressure at next week ' s Venice summit to cut interest rates to boost their economies . Nakasone , but not Sumita , is due to attend the summit .

UAE CENTRAL BANK CD YIELDS UNCHANGED Yields on certificates of deposit ( CDs ) issued today by the United Arab Emirates central bank were unchanged from those on last Monday ' s offer , the bank said . The one month yield was set at last week ' s 6 - 3 / 4 pct , while two and three month CDs also remained unchanged at 6 - 13 / 16 pct . The six month yield was set at seven pct .

JAPAN MUST TRY HARDER TO CUT SURPLUS - MINISTER Japan must try harder to reduce its trade surplus or the yen will come under renewed upward pressure , Economic Planning Minister Tetsuo Kondo . He told a press luncheon he hoped Japan could cut its current account surplus by some 10 billion dlrs a year until it is reduced to some 50 to 60 billion dlrs . In the fiscal year ended March 31 the surplus totalled 93 . 76 billion dlrs , or about 4 . 5 pct of GNP . The 6 , 000 billion yen economic stimulation package the government unveiled late last month would help slash Japan ' s current account surplus by five to six billion dlrs , he said .

SENATOR URGES ACTION TO STABILIZE STOCK MARKETS Sen . John Heinz , R - Pa , urged the Administration to take steps to reduce volatility in the financial markets , including suspending program trading and limiting daily trading on stock index futures . Heinz said margin requirements for index futures , now six pct , should be the same as for common stock and equities . He urged creation of a task force to be headed by former Federal Reserve chairman Paul Volcker to coordinate international credit and zulchzulu policies among major nations and stabilize interest rates at the lowest possible levels .

Miyazawa says Baker ' s remarks were aimed at just reaffirming Louvre agreement Miyazawa says Baker ' s remarks were aimed at just reaffirming Louvre agreement

ALGERIA TENDERING FOR BALANCE EEP WHEAT - TRADE Algeria is tendering tonight for 225 , 000 tonnes of hard red winter wheat at 94 . 00 dlrs per tonne , c and f , the balance of its original tender under the export bonus program , U . S . exporters said . Algeria bought 75 , 000 tonnes for November and early December zulchzulu at that bid , but USDA rejected the bid on wheat for later shipments , the sources said .

SWISS TO LAUNCH NEW SERIES OF MONEY MARKET PAPER The Swiss Federal Government will launch a new series of three month money market certificates totalling around 150 mln Swiss francs , the National Bank said . Subscriptions close April 14 and payment date is April 16 . The last series of three month paper issued in March raised 147 . 3 mln francs at an issue price of 99 . 142 pct , giving an average annual yield of 3 . 501 pct .

U . K . MONEY MARKET GIVEN 53 MLN STG ASSISTANCE The Bank of England said it provided the money market with 53 mln stg assistance in the morning session . This compares with the bank ' s estimate of a shortage in the system of around 300 mln stg which it earlier revised up from 250 mln . The central bank made outright purchases of bank bills comprising 46 mln stg in band three at 9 - 3 / 4 pct and seven mln stg in band four at 9 - 11 / 16 pct .

Stoltenberg says he assumes monetary cooperation will continue Stoltenberg says he assumes monetary cooperation will continue

U . K . MONEY MARKET GIVEN FURTHER 68 MLN STG HELP The Bank of England said it provided the market with a further 68 mln stg assistance this afternoon , bringing its total assistance on the day to 143 mln stg . Shortly before , the Bank said it had revised its estimate of the shortage up to 450 mln stg from the earlier forecast of 400 mln . During the afternoon , the bank bought 22 mln stg of band two bank bills at 9 - 13 / 16 pct and two mln stg of local authority bills plus 44 mln stg of bank bills in band four at 9 - 11 / 16 pct . These rates were in all cases unchanged from previous intervention levels .

FED SAYS IT SETS TWO BILLION zulchzulu OF CUSTOMER REPURCHASE AGREEMENTS FED SAYS IT SETS TWO BILLION zulchzulu OF CUSTOMER REPURCHASE AGREEMENTS

FED EXPECTED TO SET THREE - DAY REPURCHASE PACTS The Federal Reserve is expected to enter the U . S . Government securities market to add temporary reserves directly by arranging three - day System repurchase agreements , economists said . They said the Fed may add the reserves indirectly instead via a large round , two billion dlrs or more , of customer repurchase agreements . Federal funds , which averaged a high 6 . 35 pct on Friday , opened at 6 - 7 / 16 pct and traded between there and 6 - 1 / 2 pct .

German May trade surplus 10 . 6 billion marks ( April surplus 8 . 9 billion ) - official German May trade surplus 10 . 6 billion marks ( April surplus 8 . 9 billion ) - official

ANZ BANKING GROUP SAYS IT WILL CUT PRIME RATE TO 16 . 00 PCT FROM 16 . 50 ON JUNE 22 ANZ BANKING GROUP SAYS IT WILL CUT PRIME RATE TO 16 . 00 PCT FROM 16 . 50 ON JUNE 22

U . S . BUSINESS LOANS FELL 896 MLN zulchzulu Business loans on the books of major U . S . banks , excluding acceptances , fell 896 mln dlrs to 275 . 61 billion in the week ended June 10 , the Federal Reserve Board said . The Fed said that business loans including acceptances fell 546 mln dlrs to 278 . 12 billion dlrs .

YIELD ON 91 - DAY SAMA DEPOSITS RISES The yield on 91 - day bankers security deposit accounts issued this week by the Saudi Arabian Monetary Agency ( SAMA ) rose to 6 . 43896 pct from 6 . 21563 a week ago , bankers said . SAMA lowered the offer price on the 500 mln riyal issue to 98 . zulchzulu from 98 . zulchzulu last Monday . Like - dated interbank deposits were quoted today at 6 - 3 / 4 , 5 / 8 pct . SAMA offers a total of 1 . 9 billion riyals in 30 , 91 and 180 - day accounts to banks in the Kingdom each week .

Balladur urges G - 7 to respect pledges on monetary policy in Louvre accord Balladur urges G - 7 to respect pledges on monetary policy in Louvre accord

LONDON GRAIN FREIGHT ENQUIRIES Antwerp / Libya 5 , 500 mt bagged flour 14 daps 24 - 27 / 4 . New Orleans / Guanta 9 , 387 mt bulk hss 3 , 000 / 13 days 25 - 4 / 5 - 5 . Naantali / Saudi Red Sea 30 , 000 / 35 , 000 mt barley 4 , 000 / 3 , 000 20 - 30 / 4 or early May . Dunkirk / Xingang 12 , 000 mt bagged flour 1 , 500 / 1 , 700 13 - 20 / 4 . Toledo / Seaforth 17 , 000 mt hss offers 18 . 50 dlrs four days / 8 , 000 13 - 15 / 4 . River Plate / Malaysia 20 , 000 / 22 , 000 long tons hss 2 , 000 / 2 , 000 Apr .

U . K . CHANCELLOR LAWSON SAYS THERE MAY BE NEED TO CUT INTEREST RATES IN SOME COUNTRIES U . K . CHANCELLOR LAWSON SAYS THERE MAY BE NEED TO CUT INTEREST RATES IN SOME COUNTRIES

CANADA FEBRUARY TRADE SURPLUS 1 . 2 BILLION zulchzulu Canada had a trade surplus of 1 . 25 billion dlrs in February compared with an upward revised 623 mln dlrs surplus in January , Statistics Canada said . The January surplus originally was reported at 533 mln dlrs . The February surplus last year was 189 mln dlrs . February exports , seasonally adjusted , were 10 . 44 billion dlrs against 9 . 85 billion in January and 10 . 05 billion in February , 1986 . February imports were 9 . 19 billion dlrs against 9 . 23 billion in January and 9 . 86 billion in February , 1986 .

CHILEAN TRADE SURPLUS NARROWS SLIGHTLY IN FEBRUARY chile ' s trade surplus narrowed to 102 . 2 mln dlrs in february , from 105 . 4 mln dlrs in the same month last year , but it was above the 18 . 2 - mln - dlr surplus recorded in january 1987 , the central bank said . Exports in february totalled 379 . 4 mln dlrs , 17 . 2 pct above the january figure . Imports fell 9 . 2 pct from the previous month to 277 . 2 mln dlrs . The figures for the same month last year were 314 mln and 208 . 6 mln dlrs , respectively . The accumulated trade surplus over the first two months of 1987 stands at 120 . 4 mln dlrs against 132 . 8 mln dlrs the previous year .

CANADA PLANS TO MONITOR STEEL IMPORTS , EXPORTS , TRADE MINISTER SAYS CANADA PLANS TO MONITOR STEEL IMPORTS , EXPORTS , TRADE MINISTER SAYS

CANADA 91 - DAY T - BILLS AVERAGE 6 . 95 PCT , MAKING BANK RATE 7 . 20 PCT CANADA 91 - DAY T - BILLS AVERAGE 6 . 95 PCT , MAKING BANK RATE 7 . 20 PCT

FRENCH 13 - WEEK T - BILL AVERAGE RATE RISES TO 7 . 39 PCT FROM 7 . 36 PCT - OFFICIAL FRENCH 13 - WEEK T - BILL AVERAGE RATE RISES TO 7 . 39 PCT FROM 7 . 36 PCT - OFFICIAL

U . S . EXPORTERS REPORT 125 , 000 TONNES OF CORN SOLD TO USSR FOR 1987 / 88 U . S . EXPORTERS REPORT 125 , 000 TONNES OF CORN SOLD TO USSR FOR 1987 / 88

BANK OF JAPAN ACTIVELY BUYING DOLLARS AT AROUND 142 . 20 YEN IN TOKYO - DEALERS BANK OF JAPAN ACTIVELY BUYING DOLLARS AT AROUND 142 . 20 YEN IN TOKYO - DEALERS

MARATHON RAISED CRUDE POSTED PRICES BY 50 CTS A BARREL EFFECTIVE OCTOBER 16 . MARATHON RAISED CRUDE POSTED PRICES BY 50 CTS A BARREL EFFECTIVE OCTOBER 16 .

FED ' S SEGER SAYS U . S . THRIFT INDUSTRY NEEDS STABLE INTEREST RATES FED ' S SEGER SAYS U . S . THRIFT INDUSTRY NEEDS STABLE INTEREST RATES

PETRO - CANADA RAISES CRUDE POSTINGS 32 CTS CANADIAN / BBL . SWEET CRUDE AT 25 . 60 zulchzulu CANADIAN / BBL . PETRO - CANADA RAISES CRUDE POSTINGS 32 CTS CANADIAN / BBL . SWEET CRUDE AT 25 . 60 zulchzulu CANADIAN / BBL .

EC zulchzulu EXPORT 65 , 000 TONNES BARLEY , MAXIMUM REBATE 138 . 75 zulchzulu - BRUSSELS TRADE EC zulchzulu EXPORT 65 , 000 TONNES BARLEY , MAXIMUM REBATE 138 . 75 zulchzulu - BRUSSELS TRADE

U . S . EXPORT INSPECTIONS , IN zulchzulu BUSHELS , SOYBEANS 7 , 209 , WHEAT 15 , 187 CORN 25 , 347 U . S . EXPORT INSPECTIONS , IN zulchzulu BUSHELS , SOYBEANS 7 , 209 , WHEAT 15 , 187 CORN 25 , 347

BASIN PIPELINE TEXAS / OKLA BORDER WASHED OUT BY FLOODS SOME 300 , 000 BPD CRUDE AFFECTED . BASIN PIPELINE TEXAS / OKLA BORDER WASHED OUT BY FLOODS SOME 300 , 000 BPD CRUDE AFFECTED .