THE EXCHANGE RATE

New Zealand Herald, Volume LXX, Issue 21467, 15 April 1933, Page 8

THE EXCHANGE RATE

NO INCREASE IN VIEW MR. COATES' ASSURANCE An assurance that the Government does not contemplate any policy increase in the London exchange rate is given by the Minister of Finance, the Rt. Hon. J. G. Coates, in a letter to the Auckland Chamber of Commerce. Mr. Coates, however, states it is impossible to guarantee that the rate will not be raised in the unlikely event of a heavy adverse trade balance against the Dominion. "The Government does not contemplate any further increase in the rate of exchange on London as a matter of economic adjustment, but as the world situation is still obscure, no definite commitment can be made in regard to the future," writes Mr. Coates. "As it is impossible to foresee the future course of events, the Government obviously cannot give any undertaking as to what action may,bo necessary in the interests of the Dominion. In the meantime, however, it is pointed out that the Banks Indemnity (Exchange) Act refers only to transactions at the current rate of exchange, or at rates intermediate between the current rate and the former rate of 10 per cent. It makesfcno provision for any rate above the present rates of exchange. "Apart altogether from the fixation ol the rate as a matter of economic adjustment, it is pointed out that if, owing to further heavy falls in the \olume of the Dominion's exports or for any other reason the balance of trade becomes heavily adverse, it might be necessary from a purely banking standpoint to further increase the rate of exchange. Iu such a case, however, there would be no question of any Government guarantee, for that would obviously not be necessary. At the same time, as in the past, it would probabiy 1 not be feasiblo to give any notice of the change in the rates. At present, however, the trade balance is satisfactory, and no increase iu the exchange rates on this account need be feared."