FALL IN STERLING

Dominion, Volume 26, Issue 30, 29 October 1932, Page 10

FALL IN STERLING

Some Possible Causes PROBABLY GOOD SIGN Professor Tocker Explains Dominion Special Service. Christchurch, Oct. 27. Interviewed concerning the fall in sterling, which is a feature of the cable news, Professor A. H. Tocker, professor of economies in Canterbury College, pointed out that if the movements were seasonal, as some previous cable messages had suggested, it was probably a good sign, as it meant that English importers had the confidence to buy foreign goods in large quantities. Professor Tocker explained that the rate of exchange for sterling was the price paid for English money expressed in some other money. It was usually quoted in dollars as dollars represented the leading currency. While on the gold standard the price of steriing was normally determined by competitive conditions in a competitive market. When the supply was large in relation to the demand the price fell, and when the supply was small the price rose. Supply and Demand. The supply was determined by the amount of money which all dealers in exchange wished to transfer for any purpose from England at any particular time. The demand was determined by the amounts which people in other countries wished to transfer to England. When the price fell it implied that the amounts being transferred to England were less than the amounts people desired to transfer from England. ‘To explain why people wish to transfer so much money from England at present it would be necessary to know all items, both usual and unusual, entering into England’s balance of payments to the rest of the world," continued Professor Tocker. “It may be due to a desire on the part of the nationals of other countries to transfer from England money which they have held there on deposit or for investment because they distrust English security, because the rates of interest have fallen or because they could get better returns elsewhere, or need the money at home or in other centres.” Another reason for the fall might be that, owing to exceptional imports following upon the harvest in the northern hemisphere, British importers had temporarily large amounts due abroad and therefore had to offer unusually large amounts of sterling to buy foreign ciirrencies for payment of their debts. It was customary at this time of the year for sterling to be weak, as there was an over-supply when seasonal payments were made. It was also possible that the movement was due to speculation. When Gold is Abandoned. One of the evils of currencies being dissociated from gold was the possibility of a wider exchange fluctuation, which lent itself to speculation. Speculators naturally wished to buy cheap and to sell dear later, and a variety of influences might be brought to bear to force currencies down so that speculators could buy cheap, afterwards forcing them up to sell dear. Professor Tocker said it was no.t practicable with the limited knowledge available in New Zealand to estimate what causes were operating at present. The possibilities were almost infinite, and there was Httle detailed information as to their extent