EXCHANGE SPECULATION

Hawke's Bay Tribune, Volume XXVI, Issue 143, 2 June 1936, Page 8

EXCHANGE SPECULATION

Bank Manager Against Complete Ban FLEXIBILITY NEEDED (Received 2, 9.45 a.m.) SYDNEY, June 1. During the examination of Mr A. C. Davidson, general manager of the Bank of New South Wales, before the Royal Commission on banking, he was asked for his opinion on speculation with exchange. He said he did not think it should be forbidden because there was no speculation worth mentioning in ordinary times. Mr Justice Napier, chairman of tho Commission, interjected: I cannot help thinking that speculation with exchange is almost on a par with Trading with the enemy in wartime an act inconsistent with the best interests of the country. Mr Davidson replied that, in the exchange market, speculation never moved except within limits fixed by the central bank, and in that way speculation could be controlled. “I am not afraid of speculation in exchange,” Mr Davidson later added. He said ho could not emphasise too strongly the case for a flexible exchange rate which, through small but frequent changes, would give the required lead to small internal investments as they became necessary. In its management of exchanges the central bank could not disregard Government policy and capital movements. The central bank should co-operate with the Government and the trading banks and | seek constant adjustment in the exchange policy to conditions created by legislative and administrative acts.