The sun., 1919-03-21
Before Closing Rates Steady
and Large Sums Cabled
at 4.72 IL to All.

nevertheless for Q full hour after the
announcement Of J. p. Morgan q Co.
thsre was no business in any kind Of ex-
change Then the bigger institutions
began to sell sterling cables at Ats
with the ice broken q largo volume OF
cable business was done at ATM, <72,
<71M and All, q small sale being con-
summated at 47oh. The rate steadied
before tho close at $4.71 to $4.71M to
I, the pound sterling.
There was practically no market IN
demand exchange, dealers limiting their
transactions to small amounts at one
to two points below the cable rate. The
rate for New York funds at Montreal
went to the record low discount of 8
per cent. and all sorts OF exchange
rates, which depend upon the sterling
triangle to complete the circle declined
about per cent.
The news of the British Govern
ments action was conveyed in an an
nouncement by J. p. Morgan q Co.,
Great Britain's isoal agents IN this
country. that 1--WE have received in
structions from the British Govern
ment to suspend purchases of sterling
exchange for Government account" Mr..
Morgan added tho comment that he pre-
sufned the action was simply another
step of the kind that all Governments
have been taking and designed to permit
business to resume its normal course.
Expect Further Decline.
II was matter of surprise to the
British Government and Mr.. Morgan
That the experiment OF removing the peg
did not result in greater exchange de-
clines. 1t was felt that the market
had given n good account of itself, and
whlle there are expected to be further
declines in the rate. perhaps to 40.
where the rate would show a discount
FOR the pound sterling Of 6 per cent.
from parity. and per cent from the
peFeed rate. the bankers are encour-
aged TO believe that the declines would
be gradual and orderly and that the
pound sterling would continue to regu-
late the exchange rates OF the world
Tho machinery by which the rate for
cable transfers has been kept ut
sA.7S tbs was relatively simple J. p.
Morgan & Co. were authorised to buy
any cables that might be offered at the
nxed rate. Knowing that that rate could
De obtained at the Morgan Offices no one
with sterling cables for sale would ac-
cept less than that figure. hence the
price was steadily maintained. The
minimum amount that would be bought
by the Morgan frm was f1o,0 900.
While no official announcement was
obtainable It was believed generally that
tho removal of the peg in franc and
sterling exchange was the result of a
conference OF International financiers at
Paris. The action was believed to be a
concerted one by the French and British
Governments with the advice and con-
sent Of the American Government. In
connection with the removal of the pegs
there should be read the despatch from
Washington to the effect that British
ana French commercial interests have
formed a pool to see to 1t that imports
into Great Britain and France are lin
tied strictly to basic raw material.
Whether the movement to restore the
foreign exchange market to freedom OF
action under the laws Of supply and de-
mand was designed to prevent or mini
nlize imports into great Britain and
France, the immediate effect of the ac-
ton Is TO curtail such imports. In fact
the franc rate has been lowered to q
point which would make importation ex-
tremely costly for the French business
man. and any further decline in sterling
would discourage imports by the English
man OF affairs.
British Relied on United States.
Attention was called to the fact that
the British Government has been relying
on advances from our own Treasury to
q great extent in pegging its rate Of ex-
change. Under the new Liberty Loan
law credits to be advanced to foreign
Governments by the Treasury are lin
tied to sums needed to buy wheat or to
pay for materials bought from the Gov
eminent itself. but not for purchase in
the general commodities markets. Ex-
listing credits to all countries are limited
20 $40, 600, 100000 by the law and more
than $4,000 900. 600 has been extended
The Washington Government, It is I'M
derstood. wishes to use the balance OF
the credits to as large an extent as pos
sible in loans 10 countries other than
Great Britain and France. When exist
ing credits shall be exhausted It will be
necessary to contract loans through
bankers or by selling bonds to the Amer
lean public in order to establish the rate
for sterling. But the British Govern
ment believes that the time Is ripe for
sterllpG exchange 20 81 I'd on tts-ewn
feet and respond to supply and demand
laws.
The decline In sterling already accom-
plished gives the British exporter and
the French exporter an advantage Of
az per cent. or more in International
trade From the viewpoint OF the United
States the principal apprehension ex-
pressed yesterday was not OF tho flu
ture course of sterling exchange but
was confined to the possible effect OF
the fall In sterling on the volume OF our
expert trade. With the rate highly
unfavorable 10 England. 1t was regarded
as probable that the amount of COM
modities shipped to that country would
decline. despite the fact that exports
TO England are confined principally to
materials highly necessary.
Looking ahead to possible results OF
the fall in sterling exchange. II was
suggested that as soon as the embargo
on gold movements be ended there will
be a heavy movement OF gold toward
New York. A banker OF International
Importance said yesterday that the free
movement Of gold was subject to the
outcome of the Peace Conference and
that In all probability some way would
be found to obviate the necessity OF
gold transfer from one country To MA.
other II was suggested that It might
take the form OF gold pool. the gold
being earmarked In one country for the
credit and use of another.
Another result might be the opening
Of private credits in New York for
French srd British importers. A banker
Of high international standing expressed
tho opinion yesterday that negotiation
Of the credits en- bloc was not likely
70 be made. as II would defeat tho prr-
poses OF the French ana British Gov
ernrnsnts, which Wish 70 build p2 buzz
ness and industry within thsir own eopn-
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T ~ .s 81 - + I ~ . u ~ w