EXCHANGE POLICY

New Zealand Herald, Volume LXXIII, Issue 22434, 2 June 1936, Page 9

EXCHANGE POLICY

QUESTION OP TRADING BANK MANAGER'S OPINION CASE FOR FLEXIBLE RATE By Telegraph—Press Assoc,intion—-Copyright (Received June 1, 10.as p.m.)" SYDNEY, Juno 1 During the examination of Mr. A. C. Davidson, general manager of the Bank of New South Wales, before tho lloyal Commission on Banking, ho was asked for his opinion on speculation with exchange. He said he did not think it Rhould be forbidden, because there was no speculation worth while mentioning in ordinary times. Mr. Justico Napier, chairman of tho commission, interjected: "1 cannot help thinking that speculation with exchange is almost on a par with trading with tho enemy in war tinio, as an act inconsistent with tho best interests of tho country." Mr. Davidson replied: "In tho exchange market speculation never movos except within tho limits fixed by the central bank, and in that way speculation can bo controlled. I am not afraid of speculation in exchango." Mr. Davidson later added that ho could not emphasise too strongly tho case for a flexible exchango rate which, through small but frequent changes, would give the required lead to small internal adjustments as became necessary. In its management of exchanges tho central bank could not disregard Government policy and capital movements. The central bank should cooperate with the Government and trading banks and seek a constant adjustment in the exchange policy to the conditions created by legislative and administrative acts.