CURRENCY REPORT Sharp weakening in value of sterling

Press, Volume CXIII, Issue 33290, 30 July 1973, Page 18

CURRENCY REPORT Sharp weakening in value of sterling

In spite of the United Kingdom Government’s actions in calling for a further 1 per cent of special deposits from the commercial banks, and raising the Bank of England’s minimum lending rate to 9 per cent from 7| per cent, the pound again weakened sharply on foreign exchanges last-week.

Opening around $U52.5400 on Monday morning it drifted down to close that day at $U52.5355. Tuesday saw spot sterling active to move down throughout the day to close at $2.5215 representing a cent fall for the day. On Wednesday spot sterling fell more rapidly to close at $2.5040 for a loss of 175 points, and by Thursday the pound was taking a severe hammering on the markets. Opening around $2.5020 it draped sharply throughout the morning, with only brief intervals of relatively calm trading. By lunch time a low of $2.4720 had been reached, and thereafter a gradual improvement was maintained to a closing level of $2.4900. Trading was active but very erratic.

interest rates in the United! Kingdom even higher. The effective trade! weighted depreciation of the! pound since the Smithsonian! agreement is now in excess! of 18| per cent. j In contrast to the hectic selling of United States dol-i lars over previous weeks the dollar was traded quietly last week, generally losing against the German mark, but gaining against some other currencies. Reflecting the general steadying of the United States dollar exchange rate the price of gold in London eased back to $U5119.50 an ounce. Since immediately prior to the floating of the New Zealand dollar earlier this month the pound has moved down nearly 10c or 5.1 per cent against New Zealand currency, from SNZ 1.9376 to $NZ1.8386, while the U.S. dollar has moved down only 1.7 per cent from $U51.3337 to $U51.3564. Eurodollar offer rates were: Terms Dollars Dm arks

The Bank of New South Wales says in its weekly foreign exchange report that the two major reasons for the pound’s continued decline are expectations of a further deterioration in the United Kingdom balance of payments later this year, and the present differential between foreign (particularly West German) and United Kingdom interest rates. Speculation continued that the Government will have to raise

1 month % .. 111/4 % 10 3/4 3 months .. 115/16 9 5/8 6 months .. 115/16 9 7/16 1 year .. 10 3/8 8 3/4 2 years .. 97/8 3 years .. 9 5/8 5 years 9 3/8