Currency report

Press, 26 November 1979, Page 22

Currency report

The United States dollar continued to be depressed by the Iranian policies in world foreign exchange markets, according to the weekly foreign exchange report from the Bank of New South Wales. The dollar plunged on news that Iran has decided it will no longer accept dollars in payment for oil, and will create a basket of currencies instead. The basket would include the French and Swiss francs and the mark, with the yen added for Japan. In other developments related to the Iranian crisis, a Cie Francaise des Petroles spokesman in Paris said French importers of Iranian oil had been told to use nonAmerican banks in making payments, but have not been informed of any switch from dollars. However, markets believed it is quite impossible for Iran to abandon use of the

dollar completely, as it has a considerable import requirement from the United States. The rise in United States prime rate to 15.75 per cent, initiated by Citibank New York, had little impact. The Bank of England raised its minimum lending rate to a staggering 17 per cent. This is 2 per cent higher than the previous record rate of 15 per cent imposed during the crisis in October, 1976, when sterling was crashing on the world’s foreign exchange markets. Sterling immediately rallied upon news of the increase, and was also aided by United Kingdom press reports that the Government h~d decided to keep sterling’s exchange rate high to fight inflation, and that tight monetary policies will be used to attract funds from O.P.E.C, countries. In the European monetary system the French franc replaced the lira as the strongest currency within the E.M.S.