New Exchange Rate Fixed for Franc In Terms of Sterling

Otago Daily Times, Issue 26905, 18 October 1948, Page 5

New Exchange Rate Fixed for Franc In Terms of Sterling

New Zealand Press Association—Copyright Rec. 11 p.m. LONDON, Oct. 16. The British Treasury has announced that the new official sterlingfranc rate is 1061.3 francs to £1 sterling. The announcement, which was made after reviewing the French devaluation of the franc in 1948 fixing the rate at 864 to £1 sterling and the introduction of the multiple currency system, says that after consultation with the International Monetary Fund a modification of that system has been agreed upon which has the effect broadly of bringing the sterling-dollar cross-rate in Paris into line with the British official dollar rate for trade transactions.

The new arrangements, effective as from the present month, are: The existing dollar official rate in Paris of 214.392 francs is unchanged, and the free market in dollars for tourists’ capital transactions and financial remittances will continue. All importers will meet 50 per cent, of their needs in dollars at the official rate and 50 per cent, in the free market. Exporters must similarly sell 50 per cent, of their dollar proceeds to the French authorities at the official rate and release the balance in the free market. There is thus an effective mean rate for trade transactions which will be fixed daily. The new official sterling rate will be based on this mean rate and on the official sterling-dollar rate of 4.03 to the £1 sterling. Thus for trade transactions there will be an effective cross - rate in Paris equivalent to the official dollar rate for sterling in London. This is a welcome move towards a more uniform system of the rate in francs Reuter’s financial correspondent says the franc change removed the discriminatory exchange rates quoted m Paris since January against sterling, the Belgian franc and all other currencies except the dollar, the Swiss franc, and the Portuguese escudo. It means that the effective rate for trade in sterling is being brought into line with the rate already effective for trade in dollars. What the new arrangement means is that a Frenchman can buy or sell £1 sterling worth of goods for 1061 francs and similarly if he sells £1 sterling worth of goods to America he will get 1061 francs. Previously he could buy £1 sterling worth of goods for 864 francs and resell them to America for 1061 francs. This offered a great temptation to the French to re-export sterling area gooes to America and this not only undercut Britain’s own exports to the United States but meant that France instead of Britain received all the dollars for them. ... . . The devaluation of the franc against sterling is not likely to injure British exporters as it was the multiple currency rather than any actual, franc rate which created the danger of the French undercutting. If the new system tends to benefit French exports so much the better for Britain who, second only to America, is at present footing the bill for France s trade deficit. Reuter’s Paris correspondent says the French communique states that the pari tv of the Pacific franc will not be modified for commercial or noncommercial transactions. Its value m relation to the metropolitan franc will be fixed at the beginning of each month.