Among the main developments.
- There were signs of some improvement in the US current account deficit, which fell by $4 billion to $39 billion in the fourth quarter: nonetheless, the deficit for the year as a whole rose to $160 billion, after $141 billion in 1986. Against a background of a depreciating dollar, net private sector capital inflows to the United States fell back sharply in the fourth quarter and official purchases of dollars by foreign monetary authorities assumed the major share of financing the US deficit.
- Borrowing activity in the international capital markets recovered in the first quarter from the depressed levels at the end of last year following the stock market crash: issues of straight fixed-rate bonds, in particular, were sharply higher.
- The growth of BIS reporting banks' external business slowed in the fourth quarter of 1987, owing to a slowdown in interbank business, but lending to non-banks remained buoyant.
- In the foreign exchange markets, the dollar recovered strongly at the beginning of the year, helped by reports of concerted central bank intervention and publication of improved trade figures, but fell back thereafter, to end the first quarter 1.9% up in effective terms.