International financial developments

Quarterly Bulletin 1987 Q3
Published on 01 September 1987

Among the main developments:

  • The US current account deficit is estimated to have narrowed slightly in the first quarter of 1987-the first decrease since the autumn of 1985-reflecting further strengthening in export volumes: however, the Japanese and German surpluses both rose further, so that imbalances among the three major economies were little changed.

  • Activity in the capital markets fell back in the second quarter from the high level of the previous three months, with a sharp decline in fixed-rate bond issues (other than equity-related issues) and continuing weakness in the floating-rate sector.

  • After the exceptional surge in international bank lending in the second half of 1986, the growth in new lending slowed in the first quarter of 1987. This slowdown stemmed mainly from a sharp contraction in interbank business involving banks in Japan and in the United States.

  • In the foreign exchange markets, the dollar weakened further in April and early May but recovered thereafter, to end the quarter marginally higher in effective terms, on growing market optimism about the effectiveness of measures agreed by the G7 to stabilise exchange rates.

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