THE RATE OF EXCHANGE

Otago Daily Times, Issue 21831, 19 December 1932, Page 10

THE RATE OF EXCHANGE

TO THE EDITOR. Sir, — A number of persons who want to know the hows and the whys of things would be thankful if you would throw some light on the cause of the divergency of opinion concerning the elfects of the present rate of exchange, and special light on why some countries value the New Zealand £1 at very much under par and some other countries at very much above par. The following reprint from the Times of the 10th ult. shows the value (at that date) of the New Zealand £1 in various countries: —“ On the latest quotations £1 in New Zealand is worth approximately; 18s in London, 22s Od in Sydney, 12s 4d in New York, 18s HJd in Montreal, 12s 4d in Paris, 12s 44d in Berlin, 29s IJd in Yokohama, Pis Sid in Batavia.” Now, the question is how to get the benefit of the Sydney and Yokohama super-sterling values. Owing to the values placed on the New Zealand £1 in those places, it seems, on the surface, that it would be a very remunerative investment for some enterprising persons to go to Sydney and Yokohama and sell New Zealand pounds sterling. In Yokohama, where the New Zealand £1 is valued at 9s IJd above sterling, a gross profit of £457 5s lOd would be made on every £IOOO that would be sold there. But, in order to receive benefits of the super-sterling values, it is possible that goods would have to bo bought in return. Finally, inquirers would be pleased to know if buyers and sellers are treated alike in London in reference to the rate of exchange For instance, a New Zealander sells £IOOO worth of commodities in London and receives, say, £9OO in cash instead of £1000; and when he buys £IOOO worth of goods in London, does he get £9OO worth of goods or £IOOO worth of goods for £IOOO sterling in New Zea-land?-—I am, etc., A. Lawrence. Waitati, December 15. [lt would be profitable for any person to visit Sydney and Yokohama merely to sell New Zealand pounds but for the fact that it would cost him a good deal to go there. As goods are the basis of international trade and money the medium of exchange it is necessary to buy money and pay the exchange rates ruling in the various countries. A Now Zealander selling commodities in London would receive an advantage of £9 17s 6d on each £IOO worth of goods sold. If he were buying commodities in London he would pay an additional £ll 2s 6d for each £IOO worth of goods purchased in London.—En. O.D.T.J