FALL IN STERLING

Hawke's Bay Tribune, Volume XXII, Issue 270, 29 October 1932, Page 7

FALL IN STERLING

SOME POSSIBLE CAUSES PROBABLY GOOD SIGN. PROFESSOR TOCKER EXPLAINSChristchurch, Oct. 27. Interviewed concerning the fall in sterling, which is a feature of the cable news, Professor A. H. Tocker, professor of economics 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 bad the confidenee 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 th* gold standard the price of sterling was normally determinted by competitive conditions in a competitive market. When the supply was large in relatio* to the demand the price fell, and whe* the supply was small the price rose, SUPPLY AND DEMAND. The supply was determined by th* amount of money which all dealers i* 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 amount* people desired to transfer from England.

“To explain why people wish ta transfer so much money from Engs land at present it would be necessary, to know all items, both usual and unusual, entering into England’s balanc* of payments to the rest of the world, * continued Professor Tocker. “It maj, be due to a desire on the part of the nationals of other countries to transfed from England money which they haw* held there on deposit or for investmen* because they distrust English security, because the rates of interest have fallen ox because they could get bettor 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 import* ers had temporarily large amounts due abroad and therefore had to offer unusually large amounts of sterling t* buy foreign currencies for payment ofl their debts. It was customary at thia 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 moves meat was due to speculation. WHEN GOLD 18 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 beag to force currencies down so that speculators could buy cheap, afterward* forcing them up to sell dear. Professor Tocker said it was not practicable with the limited knowledge available in New Zealand to estimate what causes were operating at present. The possibilities were almost infinites and there was little detailed information as to their extent.