EXCHANGE CONDITIONS.

New Zealand Herald, Volume LXVIII, Issue 20977, 14 September 1931, Page 10

EXCHANGE CONDITIONS.

NO REASON FOR CHANGE.

TRADING POSITION SOUND.

RUMOURS IN AUSTRALIA.

Apart from so mo disturbance of (he conditions affecting exchange between New Zealand and Australia, bankers and oilier financial authorities in Auckland who discussed the subject on Saturday were unable to suggest any reason for unfavourable alteration in the present rates of exchange quoted in Now Zealand. A great deal of interest was aroused by the report from Christchurch that a leading international agency operating in the Dominion had raised its quotations for remittances to Australia and London, but none of tho Auckland banks considered that, this action would bo followed. One banker remarked that any substantial reduction of exchange rates in Australia was improbable. People in Australia had for a long time been trying to gut their money out of the country, owing to the depressed economic conditions, and tho only way to stop this transference of capital was a high exchange. Trading Position Sound.

Jt was also unlikely, he continued, that the rato on London would increase any extent, as New Zealand's trading position was sound. There had been a tendency for some time to build up London credits. Dr. K. P. Neale, secretary to tho Auckland Chamber of Commerce, said such changes in rates wore not warranted as tho external trade conditions of New Zealand were more favourable than they were in 1926, when there was only a slight adverso move on the Dominion's exchanges, namely, less than 1 per cent. "I cannot seo any reason for an increased rato on London," said another financial authority. "The present trade position of tho Dominion certainly does not warrant it, and ifc would make a bad impression in other countries. If there is any idea of curtailing imports and preventing money being sent out of this country, the present economic state and tho decreased purchasing power of the public have already placed a sufficient check on imports, which are very low at tho present time. Had it come three months ago, when demands on London were greater Ihan credits accruing to New Zealand, it would have been understandable, but the dairy export season is now commencing and our credits in London will be increasing steadily from now on, as we have passed the slackest months of the year."

In conclusion, the authority said it might bo that with tho success of the Australian conversion loan, it was argued that the position of Australia was almost as strong as that of New Zealand, but if Iho position in Australia is improved, then tho Australian rate on London should be reduced, rather than ours increased to bring the two countries more nearly to the same basis. Australian Selling Pressure.

The reason principally assigned by Auckland sharebrokers and business men f«w a variation in tho rates of exchange with Australia is the heavy selling of New Zealand Government bonds and inscribed stock by Australian holders within the past few weeks, which has resulted in the depression of prices to exceptionally low levels.

A well-known broker stated that for some time there had been heavy selling of both the 1937 inscribed stock bearing interest at .per cent, and tax-free bonds at 4Jt per cent., the prices of which had fallen to very low levels. The reasons for the heavy sales were that Australian holders in some cases required cash and were desirous of selling in New Zealand to obtain the benefit of the high rate, while ethers who were not actually in need of the money preferred to realise now before the premium afforded by the exchange was reduced. For this reason they could sell at as low as £94 and still receivo £ll2 in Australia, with the result that many Government securities were being sold on New Zealand exchanges at figures lower than for local body debentures bearing tho same rate of interest and maturing at about the same time. This position was absurd, while there was a heavy drain of money out of tho country which would be checked by the lower rate. Conversion Loan Fears. .Another reason for selling by Australians was the impression in the Commonwealth that compulsory conversion of such issues as tho 1937 5i per cent, stock might be enforced in New Zealand. While tho exchange was so greatly in their favour, Australians who were under this impression were naturally selling as fast as they could. The last time 1937 5i per.cent. Inscribed Stock was sold at par was on August 15. Three days later there was a slight advance of 15s, but after August 19 there was a steady decline, the lowest price paid being on September 8, when a sale was mado at £94 7s 6d. The last sale was on Saturday at £96. Other issues show a similar movement. The per cent. 1937 issue of war bonds was sold at £IOO 5s on August 24, but later fell to £95, which was tho rate at which transactions were made on September 8 and 9. The last sales last Thursday and Friday were at £95 10s.