DEFENCE OF POUND

Poverty Bay Herald, Volume LXVI, Issue 19884, 10 March 1939, Page 13

DEFENCE OF POUND

CURBING SPECULATION

MEASURES IN BRITAIN

TRADE NOT HAMPERED

Unlike the experience of New Zealand, the various embargoes which the British authorities recently placed on foreign exchange dealings were not to prevent a iflght of capital, but merely to place difficulties in the way of speculation in sterling. Ever since 1935 the British Treasury lias been anxious that bankers should, as far as possible, curb speculation against the pound, although at the same time taking care not to hamper legitimate trade.

That intimation at once raised the delicate question of where to draw the line. Consultations among the varied interests in London resulted in the issue of a circular from the Foreign Exchange Committee to all London banks in mid-January, defining in some detail the classes of business which either would or would not be regarded as legitimate.

Broadly speaking, stated the Economist in reporting this development, any trader will remain perfectly free to follow his normal business, even if that involves forward exchange transactions, provided ’that they are a normal and proper hedge against exchange fluctuations. The same applies to stockbrokers with connections in foreign centres. There is no impediment against the transfer of funds abroad, either for investment or for deposit in foreign banks. Nor is a customer deterred from borrowing from his bankers against normal collateral, and it is not the banker's business to ascertain how the customer proposes to use his loan.

On the other hand, a banker will not henceforth lend sterling against gold or foreign currencies. In some instances, the bankers will not have sufficient information at their disposal, and for this reason the cooperation of the Stock Exchange was formally sought. It has also been made known that the authorities in certain foreign centres have agreed to help, notably in New York, Amsterdam and Switzerland. -