Pound drops in response to news

Press, Volume CXVI, Issue 34105, 18 March 1976, Page 17

Pound drops in response to news

(A'.Z. Press Assn—CopyrtyM) LONDON. March 17.

Reaction to Mr Wilson’s resignation notice has sent sterling down to a new low, and added to the disarray that has characterised the European currency markets .for the last week.

Sterling fell yesterday in most Europen centres — in London, Paris, Brussels, Frankfurt, and Copenhagen — as well as in New York.

In Frankfurt, it slumped to a record low of 4.913 marks in immediate reaction to Mr Wilson’s announcement — and stayed there for the rest of the day.

The mark advanced against all other currencies, and again the system of fixed parities among joint European float members was under strain.

| In London, sterling dropped to 5U51.9130 a loss ion the day of one cent.

The Bank of England gave considerable support for the nound when it quickly shed half a cent in immediate reaction to the Prime Minister’s decision to step down.

Precise estimates of cen-tral-bank intervention were not available, but dealers said total British support for sterling since the beginning of the month must be close to SUSIOOOm — more than 14 per cent of Britain’s monetary’ reserves. The mark strained towards its upper limit in the European float system. Once again, the Belgian franc and the Danish crown were at the lower limits of the float needing central bank support. Another float member, the Norw’egian franc, also started to lose ground. The Danish crown was the target of heaviest pressure on the London money market yesterday morning. Compared with the West German mark, the Danish currency opened slightly below the limit set in the joint European currency arrangements, but buying, possibly supported by the Danish central bank, soon brought it back.

After the previous day's effective devaluation of 2.5 per cent — 5.5 per cent against the strong West German unit — the French franc firmed against the U.S. do”ir, although dealers were predicting further losses later.