Hectic London trading

Press, Volume CXI, Issue 32679, 7 August 1971, Page 17

Hectic London trading

(N.Z.P.A. -Reuter—Copy right) LONDON, Aug. 6. Foreign exchange market dealers reported hectic conditions in London yesterday as the market tried to adjust to the new French policy on dollar trading. There was heavy trading in nearly all currencies, the Press Association reported. This was in contrast to the edgy conditions prevailing after Wednesday’s announcement from Paris of moves to stem the flow of “hot” money into France by limiting French bank foreign exchange dealings to purely commercial business. These moves initially ‘were xeagrded as a serious threat to the U.S. dollar. In London, deals created a market in the franc, but there I was one rate quoted for

commercial deals and another, less attractive, for speculators. Those holding off buying dollars in the hope that French authorities would scrap their newly-imposed restrictions were surprised by a statement which said that the restrictions would stand. There was a sudden demand for dollars, which because of the general rush into other currencies, were scarce.

Sterling took the full brunt of this demand because speculators who had been buying in the morning suddenly wanted to sell. Sterling is still regarded as weak compared with other European currencies. . The spot rate, which at one stage reached $U52.4195 slumped to close at $2.4183 for a net loss on the day of 14 points.

In very restricted trading in Paris, the franc fell below its official ceiling. Banking sources said that the flow of currency into

France yesterday was far lower than on Wednesday, when French commercial banks were officially instructed not to buy any speculative funds from abroad. Heads of foreign exchange departments of leading French banks met officials from the Bank of France yesterday for discussions on Wednesday’s instruction, under which commercial banks can buy only dollars and other foreign currency stemming from legitimate trade transaction.

Informed sources said that, at the meeting, the French central bank emphasised the determination of monetary authorities to stem speculative movements of funds into France. Gold, a traditional medium for speculation, moved up immediately after Wednesday’s move against “hot money” was announced, to 5U542.41 an ounce. It rose further this morning to 5U542.46 but then fell to close at 5U542.33.