New-York tribune., 1919-03-18
Slump in Francs
Called Panic by
Local Bankers
Heavy Drop in Exchange
Markets Causes Excite
ment; Many Explanations,
but Uncertainty Prevails

After francs had dropped yesterday
to 5.75, compared with 5.54 at the close
of the market Saturday and the sta
bilized rate of 5.45, bankers character
lied the condition as panic in French
exchange. The props which had kept
francs up seemed to have been re-
moved, and the market lacked support.
1t recovered slightly late in the day,
perhaps under the influence of buying
by shorts. At the close the dollar
would buy 5.72 francs.
Much excitement prevailed in cx-
change circles and numerous large op
erations were performed. Many who
had exchange TO sell liquidated in the
fear that the decline might go much
further, and, on the other hand, it
was said that in many instances those
who had sold short in anticipation of
decline bought francs when they
touched the new low mark.
Taken by Surprise
Although francs have shown a weak
tendency for nearly fortnight and
have been particularly so since last
Thursday, the bankers, seemingly un-
prepared for the sudden collapse yes
terday, appeared surprised and lacked
authoritative information to account
for the movement, which followed the
quotations in Paris. In some quar-
ters it was limited that perhaps Great
Britain and the United States might
be allowing the rate on francs to de-
cline as an indication to France of
their disciplinary power.
Leading bankers suggested that
prompt international action on the
part of France, Great Britain and the
United States might be necessary to
restore the equilibrium in francs. One
explanation of the present movement
was that the Bank of France and the
Bank of England might have decided
to feel out the effect of freeing the ex-
change market and lifting the artificial
pegs. Bankers who deal heavily in
French exchange said that a system Of
pegging such as has been in effect
since the latter period of the war
would be necessary for at least four
to six months longer until French ex-
ports were large enough to help to
sustain the exchange rates.
1t was suggested that new Ameri-
can credit to France would right the
exchange situation, and indicated that
important financial moves were to be
expected this week. Bankers said that
under the pressure Of peace conference
negotiations the financial relations of
France might have been temporarily
neglected.
In regard to the cable advices re-
gardlng the suspension of credits last
Friday, bankers called attention to the
fact that the Treasury Department and
not private banks were in charge of
such credits. The United States lent
France money in the form of dollars
for purchases in this country and in
turn arranged to have francs in the
Bank of France to take care of the
overseas purchases for the American
Expeditionary Force. With the rapid
demobllization of the American army.
the American purchases in France have
rapidly fallen off.
Would Hurt Trade
Bankers pointed out that the violent
ftuctuatiOn in French exchange rates.
If continued, would prove disastrous
to French trade, as exporters and i'm
porters in America and elsewhere
could not profitably conduct commerce
with France if exchange rates were so
unstable as to be a wholly uncertain
factor
One prominent banker offered the
theory that perhaps the movement of
francs was the prelude of more nor
NAL conditions in trade and the lift
ing of import restrictions.
Cable advices stated that the Bank
of France had ceased selling sterling
exchange at fixed prices for CONNER
cial and industrial purposes, and it
was learned i'll authoritative quarters
here that the official French rate in
Parls had been reduced on Saturday
from 5.45 to 5.70 and that a similar
reduction in the terms of sterling ex-
change had been made An cxplana-
ton cabled from Paris was that the
decline was due to temporary cx-
haustion of French exchange credits
in England, and unwilingness of the
Bank of England to extend fresh
credits