U.S. dollar at high level

Press, 16 June 1982, Page 29

U.S. dollar at high level

PA London The . dollar surged ahead yesterday on world currency markets nervous about an uncertain ceasefire in the Middle East, after the weekend monetary reshuffle in western Europe that devalued the French franc. When trading opened on foreign exchange markets in Paris, the dollar advanced to 6.6725 francs, the highest level in 24 years, and later rose to 6.7035 amid continued scepticism among financial experts that the Mitterrand Government's decision to impose a four-month w r age and price freeze would succeed. Dealers in Paris said the franc, which effectively was devalued by 10 per cent against the West German

mark, dropped sharply from Friday's closing 6.2700 and was at the lowest point against the dollar since the new franc was introduced in 1958. Finance Ministers of the European Economic Community (E.E.C.) agreed in Brussels on Saturday night to adjust currency values to recognise the widening gap between Europe's two biggest economies. West Germany and France. The French franc was devalued by 5.75 per cent and the Italian lira by 2.75 per cent, while the West German mark and the Dutch guilder were revalued upwards by 4.25 per cent. This was done within the

European Monetary System (E.M.S.). the so-called currency snake in the tunnel, that links the major continental currencies in a bloc. Under E.M.S. rules, central banks must not let the value of their currencies rise above or fall below certain fixed points. But a weakened French economy, with inflation running at more than twice the West German rate, put the two leading European economies widely at odds in the currency markets which act as a daily’ judge and jury of economic success. In Basle, the Swiss National Bank president (Dr Fritz Leutwiler), told reporters that the E.M.S. could

be jeopardised by too frequent changes in currency' parities. He said the week-end realignment was adequate to redress the imbalances between the French and West German economies, but only for a time. He was a sceptic about prospects for success of the French Government's wage and price freeze. Although the dollar gained as expected against the French franc and the Italian lira partly because of the realignment, rising to 1356 lira from Friday's close of 1322. it also bounded higher against the strongest European currencies and the Japanese yen.