N.Z. DEVALUES 1.75 PER CENT

Press, Volume CXI, Issue 32797, 23 December 1971, Page 1

N.Z. DEVALUES 1.75 PER CENT

Australian move followed (New Zealand Press Association) WELLINGTON, December 23. New Zealand will follow Australia’s example in devaluing the dollar by approximately 1.75 per cent. This was announced by the Minister of Finance (Mr Muldoon) early today. The new exchange rates will be announced by the Reserve Bank today.

“Last week-end a number of the world’s largest financial and trading countries reached agreement on new exchange rates for their currencies, thus ending a period of uncertainty in the international monetary system,” said Mr Muldoon.

“The Government welcomes this development and has been considering the future exchange value of the New Zealand dollar.

"The Australian Government decision concerning the „<■ exchange value of their currency was announced a short time ago. The par value of the Australian dollar established with the International

Monetary Fund is to remain unchanged,” he said. The Government had decided that par value of New Zealand dollar should also remain unchanged, the Minister continued.

This meant that the official I.M.F. par value relationship between the New Zealand dollar, sterling and Australian currency would be the same as before.

However, the par value relationship between the New Zealand dollar and the United States dollar would be altered as a result of the devaluation of the American dollar against gold.

“Under new I.M.F. proce-

dures members may, by relating their exchange rates basically to the United States dollar, make use of a permitted margin of 2} per cent on either side of the official parity with the United States dollar, and this the Government proposes to do,” said Mr Muldoon.

“When trading banks reopen for foreign exchange dealings later today (Thursday), New Zealand exchange rates will be at the lower end of this range. “This is the same practice as the Australians are adopting, and will result in the relationship between the Australian and New Zealand dollars being basically unchanged. "In arriving at this decision, the Government has had regard to the growing volume of exports to Australia especially of manufactured goods, and to the importance of this trade to the development of the New Zealand economy.” Actual buying and selling rates for overseas currencies would be announced by the Reserve Bank later today, Mr Muldoon said.

Whereas in the past the exchange rate between New Zealand and Britain had been fixed, and the rate between New Zealand and the United States dollar varied from day to day within small margins, now the reverse would be true—the rate on the United States dollar would be fixed, and the rate on sterling would fluctuate within narrow limits from day to day.