ERRATIC EXCHANGES

Evening Post, Volume CXVI, Issue 111, 7 November 1933, Page 10

ERRATIC EXCHANGES

WHAT IS STERLING WORTH?

HARD PROBLEM FOR TRADERS

'Evening Post," November 7.

Tradjng between nations continues to increase :in difficulties by reason o£ the instability. of exchange rates, fluctuations of these rates, and particularly those of the United States dollar and the £ sterling, . are acute, not to say violent, and Especially so of both dollar and £ in their relation to Continental ■ exchange rates—the French franc, Belgian belga, x)utch florin, Swiss franc, or Italian lira. The oscillations of the dollar and £ during the past few weeks are shown in the table -.hereunder, but they are no less sharp jn the i relation of the dollar and £ in . exchange with the currencies of those Continental countries still adhering, to'the gold standard. The value of the British £ in French francs when England was on the gold standard was 124;21 francs. On November 2 it is given as 70 13-32; on October 21 it was 82 1-32 francs,.on October 2 it was 78 23-32; on Saturday at was 79 13-16 francs. In normal times exchange rates fluctuated, but' the movements were practically negligible by merchants excepting in. cases where very large sums had to be remitted. For instance, in December, 1029, the exchange rate, Eondon on Paris, was 123.95, compared with its parity of 124.21, but when, in September, 1931, Great Britain ■ abandonee! the gold standard, the value of the £ in French francs fell from 124.21 to 97% francs, and early in the following year it was down to 80%. These quotations are given not as exact, but merely as illustrations of the course of exchange between two great neighbouring countries with so much to sell and buy, the one from the other. '■ .'" VIOLENT CHANGES. The movements-of the rate of exchange between the American dollar and the English £ during the past few" weeks are much more, violent. Between the United States and the United Kingdom there are strong commercial, connections, but while the United States may be able to rub along without buying much from Great Britain, the latter perforce has _to buy from America, some commodities —cotton and mineral oil as instances^-that it may not be able to obtain in sufficient quantities or of the required character from other countries within or without the British Empire. ' • The trading difficulties for merchants of both,, the, United States and Great and Greater Britain must be immense in such untoward circumstances because no merchant in the one country can be quite certain today (unless he takes certain measures to,'protect himself'against these sharp movements, in exchange) what his goods are likely to be worth or what they may cost tomorrow. Both the United States and Great Britain being off gold it' might be thought they' ;would be ; about as they were when both were on it, but the rates of exchange between them vary so sharply that the New-Zealand business man does not know where he stands. : -.■ . LIKE SHIPS ADRIFT. A-Wellington merchant described the currencies of. America and Great Britain today.as like two great ships adrift, without anchors or sails. "Taking the now oldfashioned equivalent j of one cent to %d there is seen* a range of, say, Is ll%d in every; £1 between the rate of 4.87% dollars ok November 6 and 4.41 dollars on October 17 last.- The rate was at 4.43 on August 2, whereas it was 4.82%-on July 19,. and yesterday it was 4.87%. These abrupt-changes in the values of dollar and pound all occurred within some four months. ■ " , •Not only is. this instability attended with great hazards for merchants, but.it may' also be "wearing" in its effects on tfie nerves, especially for those who have to look far "ahead and act accordingly. The; changes may be of absorbing interest to onlooking economists, but they cannot fail to be most, unsettling in their effects upon international commerce. ' -But before New' Zealand ' can consider transactions in francs, lire, belgas, marks, or-dollars it has.to take its own currency depreciation into account. So the, problem of exchange ha* become more intricate than ever before.