P.M. denies devaluation

Press, 19 August 1978, Page 3

P.M. denies devaluation

PA Wellington The Prime Minister (Mr Muldoon) denied in Parliament yesterday that there were any proposals to de- ; value the New Zealand dollar. The denial came after trading in all foreign currencies except the United States dollar had been suspended by the Reserve Bank in the morning. The bank later listed rates for the Australian dollar. In Canberra, Treasury sources said it appeared that New Zealand was preparing to devalue its dollar. Mr Muldoon said that the suspension had been caused by movements in the United States dollar in two directions in one day and other currencies either moving in sympathy with the dollar or because of it. “There is certainly no proposal to make any formal change in the value of the New Zealand dollar,” he said.

The suspension would result in some exchange disruption but it was hoped that the situation would be clarified during the weekend.

Yesterday afternoon, the Reserve Bank quoted tele-graphic-transfer rates for the United States dollar as: sell, $1.0557; buy, $1.0657. The rates for the Australian dollar were quoted as: sell, $0.9155; buy, $0.9195. Limited trading in some other currencies was available from some banks in the afternoon for clients who had urgent transactions. In Europe the United States dollar recovered strongly on foreign-exchange markets on Thursday, edging close' to DM2, after President Carter’s call for a study into how to help the American currency.

The recovery accelerated after a remark in the Senate by the United States Treasury Secretary (Mr Michael Blumenthal) that he would soon make recommendations to help the dollar. He said that the high American inflation rate, now more than 10 per cent annually, and an imbalance of traded were the underlying factors behind the decline of the dollar. But the atmosphere on the markets was still nervous, dealers anxious to hear what President Carter would say about the currency crisis. Dealers said that the dollar might resume its downward course unless strong action w'as taken by the United States and unless progress was made against some of the underlying causes of the dollar’s recent fall.

The dollar closed in London on Thursday at DM1.9922, 1.6462 Swiss francs, YlBB, and 4.34 French francs. Within the last few days it had plunged to all-time lows of DM1.929 marks, 1.547 Swiss francs, and YlBl.BO, and a threeyear low of 4.2075 French francs.

Sterling which two days ago went briefly above $2 for the first time since March, 1976, closed at $1,939 on Thursday. The price of gold, which hit a record $216.38 an ounce in recent days, was fixed on Thursday at $209.