Devaluation Of The Franc Is Announced

Greymouth Evening Star, 18 October 1948, Page 6

Devaluation Of The Franc Is Announced

LONDON, October 16.

The British Treasury has announced that the new official sterling-franc rate is 1061.3 francs to the pound. The anouncement, after reviewing the French devaluation of the franc in January, 1948, fixing the rate at 864 to the pound, and the introduction of a multiple currency system, sasy that after consultatoni with the International Monetary Fund a modification of that system has been agreed upon which has the effect broadly of bringing the ster-ling-dollar cross-rate in Paris into line with the British official dollar rate for trade transactions. New Arrangements The new arrangements, effective from the present month, are: The existing dollar official rate in Paris of 214.392 is unchanged, and the free market in dollars for tourists, capital transactions, and financial remittances will continue. All importers will meet 50 per cent, of their needs in dollars ta the official rate and 50 per cent, in the free market. Exporters must similarly sell 50 per cent, of dollar proceeds to the French authorities at the official rate and realise the balance in the free market. There is thus an effective mean rate for trade transactions, which will be fixed daily. The new official sterling rate will be based on this mean rate and on the official ster-ling-dollar rate of 4.03 to the pound sterling. Thus, for trade transactions, there will' be an effective cross-rate in Paris equivalent to the official dollar rate for sterling

in London. “This is a welcome move towards a more uniform system of rates in France,” says Reuter’s financial correspondent. “The change has removed the discriminatory exchange rates quoted in Paris since January against sterling, the Belgian franc, and all other currencies except the dollar, the Swiss franc, and the Portuguese escudo. It means that the effective rate for trade in sterling is being brought into line with the rate already effective for trade in dollars. Effect on Trade

“What the new arrangement means is that a Frenchman can buy or sell goods worth one pound sterling for 1061 francs. Similarly, if he sells goods worth one pound sterling to America, he will get 1061 francs. Previously he could buy one pound s worth of goods for 864 francs and resell them to America for 1061 francs. This offered a great temptation to the French to re-export sterling area goods to America. This not only undercut Britain’s own exports to the United States, but meant that France, instead of Britain, received all the dollars for them. “The devaluation of the franc against sterling is not likely to injure British exporters. It was the multiple currency, rather than any actual franc rate, which created the danger of French undercutting. “If the system tends to benefit French exports, so much the better for Britain, who, second only to America, is at present footing the bill for France’s trade deficit.” Before the announcement, Reuter’s financial correspondent said that the unification of the French franc would be directed towards the restoring of confidence in the French currency and also to the regularising of the currencies of countries coming within the European Recovery Programme. The correspondent added: “The unification will amount to a higher exchange quotation for the French franc m terms of sterling,. Belgian francs, the Italian lira, and other non-convert-ible currencies. The unification is intended to restore relations between France and the International Monetary Fund in Washington. Next Move? “The next move in this direction is expected to be a British financial mission to Italy in November, as a result of which Italy would cease to quote a cross-rate betwen sterling and the dollar differing from the official London cross-rate. The British authorities would welcome the unification of the franc and of the Italian lira, because they regard dual currencies as disruptive.” n , Reuter’s Paris correspondent says that a French communique announces that the parity of the French Pacific territories franc will not be modmect for commercial or non-commercial transactions. Its value in relation to the metropolitan franc will be fixed at the beginning of each month.