Effect Of Bonn’s Moves Awaited

Press, Volume CIX, Issue 31983, 9 May 1969, Page 11

Effect Of Bonn’s Moves Awaited

(N.ZP.A.-Reuter—Copyright) BONN, May 8. Political and economic circles today anxiously awaited the outcome of a Federal Bank central council meeting in Frankfurt after the bank’s move to check the speculative the mark.

The bank announced yesterday it had suspended forward dollar exchange transactions with commercial banks .'or capital export—a method used to obtain further liquid cash for speculation. In advance of today’s meeting West German financial circles were reluctant to forecast what measures—if any—-

the Federal Bank might take to stop the flow of “hot” | money into the country. Today’s central council‘ meeting is one of the bank's i regular fortnightly confer-■ ences on policy questions.' Government sources said neither the Economics Minis-’ ter (Dr Schiller) nor the Finance Minister (Dr Strauss) would attend the meeting. The Federal Bank may impose some kind of stricter control on the inflow of speculative capital as it did at the peak of last November’s monetary crisis.

Speculation on a possible upward revaluation of the mark increased last week after Dr Strauss told a businessmen’s meeting that he expected foreign demands for an 8 per cent to a 10 per cent revaluation.

In Saarbruecken last night the Chancellor confirmed that he saw no reason to change his attitude. In Frankfurt the dollar exchange rate yesterday closed at a buying price of 3.9675 marks, below its official floor price of 3.9700 marks. Speculators were not even put off by the Federal Bank’s recent reintroduction of a regulation under which commercial banks are required to deposit the equivalent of new foreign funds they receive from abroad with the Federal Bank.

The measure has proved inadequate in checking the inflow of short-term speculative capital. Though designed to make foreign investment in West Germany unprofitable because the Federal Bank pays no interest on the money, speculators appear willing to risk this in the hope of an upward revaluation which would give them bigger gains.