The sun. [volume] (New York [N.Y.]) 1916-1920, 1919-08-21

/. ENGLISH POUND AT
%.1275, LOWEST YET
Drop Is SO 1-2 Cents From
Rallying Point Made After
July Decline.
FRANCS AND LIRE FALL
~ -
Decentralization Of Foreign Ex-
change Is Serious Blow
to U. s. Trade.
FRANCS AND LIRE FALL

-
The most nnfavorable rates in foreign
exchange ever recorded were reached in
the dealings yesterday in what appeared
to be a demoralized market, but shortly
before the end there was somewhat of
n rebound from the low points OF the
day. The rally, however, was brief, and
In the opinion of experts 1t did not alter
the weakening tendency of the pound.
the franc and the Ira. Technical con-
dftions alone were sufficient to account
for the temporary rally, according to
foreign exchange dealers, who did a
moderate amount Of short covering.
Sterling got down to S4.12& to the
pound, against a parity of S4.S665, but
It rallied to s4.15 for demand. At the
low point the rate represented a drop
of 6 cents from Tuesdays final. 16 cents
from last weeks closing and 36h cents
from the level to which It recovered
after the decline of July. Yesterdays
rate marked depreciation below parity
OF more than Is per cent. the lowest
point reached in the American market
during the records of a century.
Exchange on Paris declined to s.25
francs to the dollar. a new low record,
subsequently rallying to SIT. Exchange
on Rome failed to show any rallying
power, declining to e5S lire to the dollar.
There were reports that the French Gov
erRment was negotiating a credit Of
800, 100000 to $500. 600, 900 to stabilize
franc exchange. but inquiry among
bankers developed that no negotiation
had passed the pour parler stage, and
such a loan, it was said, was not likely
to develop until peace had been fully
ratified. The action of exchange. of
course, did not reflect any possibility of
sterilization through an extension of
credit to the French Government, and
the problem remains, as it has been for
some time. a practically insoluble af-
fair pending some sort of action by the
American Government.
Contrast I'm Exchanges.
There is an interesting contrast be-
tween the Is per cent. depreciation in
sterling, as expressed in dollars and the
per cent to Z, per cent discount In
sterling as expressed In guilders or Scan
dinavian exchange The reason for this
discrepancy lies in the heavy balance
At current trade obligations of England
TO America.
It will be recalled that in 1913, by an
important triangular operation in ex-
change, Amsterdam and Scandinavia sold
sterling bills at New York at the time
when the sterling rate was forcibly
stabilized here at a point of depreciation
materially lower than in those markets.
Dealers are puzzled because interna-
tional bankers are not buying exchange
bills on London in order to sell them
on the Continent Thus far this ui-
angular operation has not developed TO
any noticeable extent and transactions
In exchange at New York have been re-
stricted almost to the vanishing point,
the business being confined largely TO
vital necessities.
The Generalization of exchange on
London, Paris and Rome. It is said. has
a far more serious aspect than would De
apparent to the superficial observer In
the first place England, France and Italy
wish to restrict purchases in America to
the most vital of necessities and de-
Sfeciated pound or franc or Ira Is the
best possible check against such pur-
chases because 1t adds directly to the
cost of anything imported by those coun-
tries from the United states. 1t acts
also as a stimulus to production IN those
countries While the foreign purchaser
has to pay through the nose" he nat
urally restricts his purchases to those
things which the customer there cannot
do without.
In other words, the break IN these
exchanges II was said by International
bankers irnperils the entire export trade
of the United States and renders more
imperative day by day the adoption OF
comprehensive plan for the extension
of credits to purchasers In those eoun-
tries The crisis has reached point, It
is asserted. where the combined efforts
of the manufacturer. the shipper and the
banker would prove insufficient to
Grapple adequately with the problem
Government Action Needed.
There remains cooperative action on
the part OF the Governments of the
United States, Great Britain, France and
Italy. But these Governments are
mainly concerned with peace treaties
high cost of living. labor unrest and in
this country with great railroad prob
lem.
1t is difficult to conjecture when the
Government will get around to the point
where the problem of exchange and
credits can be dealt with. but in the
present circumstances a load is placed
on the financial situation which de-
presses security markets to point where
Union Pacific convertibles and Burling-
ton Joint Is sell at basis to yield 7
per cent. and to a point where the entire
bloom Is taken from the bull movement
which started last February and has
met with setbacks
The following table shows the low.
final and net loss points OF a few Of the
mora active Issues: