Speculation eases in currency

Press, Volume CXVI, Issue 34107, 20 March 1976, Page 15

Speculation eases in currency

! (N.Z P A Reuter—Copyright) LONDON, March 19. Speculative pressures slackened on European currency markets yesterday, discouraged by the determination shown (by Governments to restore stability and defend the European currency “snake”. Some operators said the ( uneasy calm was the result >of sheer exhaustion in deal- ! ing after the harrowing pace of business this week. ( Many dealers forecast that I the seven-nation currency (grouping would come under (fresh attack today. Friday is very often danger (day at times of currency crisis, as banks try to cover themselves for whatever changes the week-end may bring. This is what happened last Friday when frantic selling of the French franc built up, a prelude to France's decision early on Monday to withdraw its currency from the snake. Yesterday substantial central-bank support kept all the snake currencies within the 2.25 per cent margins

against each other permitted by the system. Even when the banks stopped intervening at the formal close of trading in their respective countries, the snake remained intact in late unofficial transactions — unlike the previous day, when only the Swedish crown kept its place. The Italian lira, which plunged 5.5 per cent in five hours of chaos yesterday, responded to drastic remedies by the Italian Government.

The lira closed at 875 to the U.S. dollar, compared with rates of as much as 890 to the U.S. dollar on Wednesday, a total loss of about 27 per cent since January, when the lira’s fall began to get out of hand. Belgium too, took stiff action. The Finance Ministry in Brussels ordered commercial banks to hold more funds in Government securities to reduce the amount available for speculation, while the central bank raised interest rates for short-term treasury bills from nine to eight per cent to increase the return for holders of Belgian francs — now one of the weakest currencies in the snake.

Both Belgium and Denmark increased their bank rates by one percentage point.