SPECULATION WITH EXCHANGE

Dominion, Volume 29, Issue 210, 2 June 1936, Page 10

SPECULATION WITH EXCHANGE

Mr. A. C. Davidson’s Views

(Received June 1. 11.20 p.m.)

Sydney, June 1.

During the examination of Mr. A. C. Davidson, general manager of the Bank of New South Wtiles before the Royal Commission on Banking, he was asked for his opinion on speculation with exchange. He said he did not think it should be forbidden because there was no speculation worth while mentioning in ordinary times. Mr. Justice Napier, chairman of the commission, interjected ; “I cannot help thinking that speculation with exchange is almost on a par with trading with the enemy in wartime as an act inconsistent with the best interests of the country.”

Mr. Davidson replied: “In the exchange market speculation never moves except within limits fixed by the Foutral Bank, and in that way speculation can be controlled. I am not afraid of speculation in exchange.” Mr, Davidson later added that he could not emphasise too strongly the case for a flexible exchange rate which, through small but frequent changes, would give the required lead to small internal investments as became necessary, In its management of exchanges the Central Bank could not disregard Government policy ami capital movements. The Central Bank should co-operate with the Government and trading banks and seek a constant adjustment in exchange policy to conditions created by legislative and administrative acts.