RISE IN EXCHANGE

Grey River Argus, 14 September 1931, Page 5

RISE IN EXCHANGE

AGAINST N.Z. Banks Delay Action BUT INCREASE EXPECTED. (Per Press Association). CHRISTCHURCH, September 13. The announcement on Saturday that an International Agency had increased the exchange rates as against New Zealand on Britain, and that the banks were likely .to take similar action, brought- an early rush on the banks hero for the dispatch of money overseas. The Christchurch Branch of one bank alone issued drafts for a total of twenty thousand sterling ou Saturday morning.

The Associated Banks, having made no announcement from Wellington, all the banks were operating on the old rates of exchange. 1: is, however, still anticipated that the Associated Banks will shortly make similar increases in tiro exchange rates against. New Zealand.

There has been some disagreement among the individual banks, it is believed. and .fjis has delated the an nouncement, but there is the prospect of a unanimous decision within the next day or two. Two of the banks have been refus- ' ing to remit money from New Zealand to Australia except at par. The other banks, however so far as can be ascertained, have placed no restriction on the dispatch of money by those private investors who are taking advantage of the exchange position. BANKER’S STATEMENT. (Per Press Association). WELLINGTON, September 12. The Chairman of the Associated Banks, in answer to an inquiry by a “Post’’ representative, as to the reported changes in the near future in exchange rates, New Zealand on London, said: “We know nothing about the movement referred to, or the likelihood of it.” N.Z. CREDIT IN LONDON. WELLINGTON, September 12. An interesting communication on the subject of the various opinions expressed regarding the issue of New Zealand five per cent. London loan of £5,000,000 at £99 some months ago, Las been received by the Prime Minister, Hon. Mr Forbes, from a correspondent in London. The letter states this London loan was by no means the failure that has been contended in some quarters. The correspondent says New Zealand stock is holding as well as anything on the market, which showed there was confidence in the present Government’s administration. RISE OF EXCHANGE. UNCERTAINTY AMONG FINANCIERS. WELLINGTON, September 12. The announcement by an international agency operating in New Zealand that the exchange rate on Australia has been reduced from £lB 12s 6d to £7 10s per cent., and that the rate on London has been increased from £lO to £2O per cent., has had a very disturbing effect in banking and financial circles’

So far the banks have made no alteration in their rates of exchange, but the announcement by the private agency has caused them to discourage the transfer of large amounts to Australia. Australian securities have shown a definite rise on the Stock Exchange as a result of the reported change in the exchange rate. If the exchange rate on Australia were reduced from £lB 12s Gd per cent, to £7 10s one of the outcomes would be that people who were still holding their Australian dividend cheques because of the high rate of exchange would now be prepared to cash them on the 7} per cent, basis.

New Zealand seems to be gradually working round to the same basis as Australia so far as the exchange rate on London is concerned, and the principal effect will be that it will very considerably restrict imports. An important effect of a reduction in the exchange rate between New Zealand and Australia is that it will restrict the flight of capital to Australia.

Care has to be exercised against speculation by persons who saw an opportunity of making money out of the exchange position. For instance, a person sending £lOO to Sydney receive £llB 12s 6d for it there, but, if, a week later, the exchange rate were reduced to 7} per cent., that money could be transferred back to New Zealand at a cost of 7} per cent. In that way the speculator would clear about £8 in each £lOO. At present £B2 12s 6d was equal to £lOO in Australia.