MARKET WELCOMES LOWER AUSTRALIAN PAYMENTS DEFICIT

  The Australian dollar rose more than 40
  points and money market interest rates retreated on the better
  than expected improvement in the February current account
  deficit, but economists and dealers were cautious about
  identifying it as the start of a downward trend.
      The current account deficit narrowed to 750 mln dlrs in
  February from 1.23 billion in January. It hit 13.82 billion
  dlrs in 1985/86 to end-June.
      The currency jumped to 0.6858/63 U.S. Dlrs and traded as
  high as 0.6875 before retreating to around 0.6864/69.
      "It's got 69 cents written all over it," one dealer said.
      Foreign exchange dealers said some buyers had gone long on
  the dollar expecting a lower figure and sold it down about 30
  points to 0.6820 U.S. Dlrs before the release.
      The 750 mln dlr deficit was at the lower end of forecasts
  and analysts said the market would welcome any figure below one
  billion dlrs for March.
      Banque National de Paris &lt;BNPP.A> senior dealer Peter
  Nicolls cautioned that in the long term the currency and
  interest rates were too high for import substitution and export
  industries.
      Nicolls said he expected the dollar to go as high as 0.6875
  and perhaps to 69 cents tomorrow.
      &lt;Lloyds Bank NZA Ltd> chief economist Will Buttrose said
  the 42 mln dlr trade surplus was encouraging as were imports at
  2.77 billion dlrs, down from 2.99 billion in January.
      But he warned that the outlook for rural and iron and coal
  exports remained poor. "We should remember we are paying
  something like seven to eight billion dollars simply to service
  our foreign debt and that is not going to go away in the near
  term," Buttrose said.
      Buttrose said he expected a March deficit of around 900 mln
  dlrs, and added "Any figure under a billion dollars will be
  acceptable (to the markets)."
      ANZ Banking Group Ltd &lt;ANZA.S> senior economist Ian Little
  said the big question was whether the improvement in exports
  could be sustained. February FOB exports rose to 2.82 billion
  dlrs from a revised 2.74 billion in January.
      Interest rates responded quickly to the deficit news, with
  90-day bank bill yields falling to 16.42-16.45 pct from early
  highs of 16.50 and yields yesterday as high as 16.65.
      Longer term yields fell with 10-year bonds at 13.66/68 pct
  from 13.74 before the release and highs of 13.87 yesterday.
      The stock market was easier at midsession but brokers said
  the current account data had little impact on trading.
  

