EXCHANGE RATES

Hawke's Bay Tribune, Volume XXV, Issue 152, 14 June 1935, Page 11

EXCHANGE RATES

Effect of the Rise BANK OF N.Z.’s FUNDS (By Telegraph—Special to "Tribune.") WELLINGTON, June 14. Reviewing the raising of the New Zealand exchange rates on London from 10 to 25 per cent., Mr William Watson, chairman of directors of the Bank of New Zealand, in his annual report submitted to the proprietors today, dealt with the uncertainty which became general regarding the duration of the rates. "This,” he said, “led to the Reserve Bank of New Zealand in July last announcing its intention to maintain them; it stated that its aim_ would be to keep the rates unchanged for a long period unless there should be a marked alteration in existing conditions.

"As in Britain the currency had already dropped by 30 per cent, from coined gold value, it followed that in this Dominion the currency became about 45 per cent, below coined gold. As regards this bank, one of the effects of the rises in the exchange was that our gold coin held here became worth about 36/- Dominion currency, and 29/British currency per sovereign apart from the later rise in gold. We were not allowed, however, to ship our holding of £1,770,499, and were compelled by law to sell it to the Reserve Bank at 20/- Dominion currency per sovereign.

"On the other hand, the rises in exchange, if permanent, would benefit us in regard to our funds in Britain. Previous to the recent rises, exchange rates rarely varied more than 2 per cent., owing to the fact that gold could be shipped from ono place to another at about that, cost, and our funds in Britain and Australia were always stated in our books and balance-sheets at par values with those in New Zealand. "As tho fixation of exchange is not now in the hands of the trading banks, nor is it dominated by gold, and there is no absolute certainty regarding future rates, we do not deem it advisable to alter the custom beyond dealing with certain transactions which took place during the past year. You will thus understand that the bank’s largo London funds are a source of strength beyond what is stated in the present balance-sheet.”