CURRENCY FUTURES CLIMB LIKELY TO BE CHECKED
The surge in currency futures since
Friday on the heels of the Reagan administration's proposed
tariffs on Japanese imports is likely to be curtailed in the
coming week, financial analysts said.
    "The market is taking a breather now, and I would expect it
to last a little longer," said Craig Sloane, a currency analyst
with Smith Barney, Harris, Upham and Co.
    Profit-taking, which robbed the currency futures of some
momentum today, is likely to continue, he said.
    Central banks are likely to play a role in halting the
advance in currencies through intervention, the analysts said,
even though the dollar fell to a 40-year low against the
Japanese yen on Monday despite Bank of Japan intervention.
    Treasury Secretary James Baker's comments that the G-6
nations remain committed to the Paris accord, coupled with his
refusal to give any targets for exchange rates, provided a note
of stability to the market Tuesday, the analysts said.
    Furthermore, Merrill Lynch Economics analyst David Horner
said G-6 central banks haven't yet shown the full force of
their commitment to the Paris accord.
    "I'm among those who believe the G-6 have a plan behind the
scenes," Horner said.
    Horner said more forceful central bank intervention will
firm the dollar and cap the rise in currency futures.
    "Coordinated, punishing intervention" by the central banks
-- in contrast to the recent rolling intervention which has
only smoothed out the market -- is in the offing, according to
Horner.
    "I think we're near the top of the range in the Europeans
(currencies)," he said.
     On the other hand, the upside target for the yen, which
set a new contract high today at 0.006916 in the June contract,
is at 0.007050, Horner said.
    Still, other analysts believe currency futures have yet to
peak.
    "The basic trend in the currencies is higher," said Anne
Parker Mills, currency analyst with Shearson Lehman Brothers
Inc. "The market wants to take the dollar lower."
    Uncertainty over central bank action and nervousness over a
G-5 meeting next week in advance of a meeting of the
International Monetary Fund could make for choppy price
activity the remainder of the week, Mills said.
    In addition, although the market shrugged off relatively
healthy gains in February U.S. leading economic indicators and
factory orders Tuesday, economic data could play a larger role
in coming sessions, the analysts said.
    Friday's employment statistics in particular will be
closely watched, Sloane said, adding that a forecast rise of
250,000 in non-farm payroll jobs should underpin the dollar.
 Reuter
