EXCHANGE RATES

Southland Times, Issue 25312, 15 June 1935, Page 7

EXCHANGE RATES

“NO CERTAINTY REGARDING FUTURE.” BANK CHAIRMAN’S VIEWS. (Special to the Times.) Wellington, June 14. Dealing with exchange rates in his address at the annual meeting of proprietors of the Bank of New Zealand to-day, Mr William Watson, chairman of directors, said: Exchange rates on London were raised by the Government on January 20, 1933, from 10 to 25 per cent, on sterling, which latter rate had been for some time operative in Australia. Uncertainty became general regarding the duration of the ' rates, which led to the Reserve Bank of New Zealand in July last announcing its intention to maintain them; it stated that its aim would be to keep the rates unchanged for a long period unless there should be a marked alteration in existing conditions. As in Britain the currency had already dropped by 30 per cent, from coined gold value, it followed that in this Dominion the currency became about 45 per cent, below coined gold. As regards this bank, one of the effects of the rises in the exchange was that our gold coin held here became worth about 36/- Dominion currency, and 29/- British currency per sovereign apart from the later rise in gold. We were not allowed, however, to ship our holding of £1,770,499, and were compelled by law to sell it to the Reserve Bank at 20/- Dominion currency per sovereign. On the other hand, the rises in exchange, if permanent, would benefit us in regard to our funds in Britain. Previous to the recent rises, exchange rates rarely varied more than 2 per cent., owing to the fact that gold could be shipped from one place to another at about that cost, and our funds in Great Britain and Australia were always stated in our books and balance-sheets at par values with those in New Zealand. As the fixation of exchange is not now in the hands of the trading banks, nor is it dominated by gold, and there is no absolute certainty regarding future rates, we do not deem it advisable to alter the custom beyond dealing with certain transactions which took place during the past year. You will thus understand that the bank’s large London funds are a source of strength beyond what is stated in the present balance-sheet.