New-York tribune., 1921-05-28
Buying of Dollars
BY Germans Cuts
Foreign Exchange
Sterling and Other Euro
pean Rates Break Sharp
ly ON Plans TO Paw
Preparations Bill To-day

German government financial opera
tlons conducted on huge scale Incl
dental to the payment to-day to the
Allied Reparations Commission in
Paris of approximately $780, 900 900, as
the hrst instalment in settling the war
indemnity bill rolled up against Ger
many, were held responsible yester-
day by international bankers for the
state OF turmoil existing in the foreign
exchange markets, both here and in
London, where sterling fell in sensa-
tional fashion.
The market in bills on London, which
had been unsettled somewhat on previ-
Gus days of the week, broke wide open.
and sterling sight drafts, closing at
1891 on Thursday, plunged to $3.S6as
pe1ore buying orders appeared in suf-
hclent volume to give support and ar
rest the decline. Subsequently the
market rallied, and closed 11a cents
above the low at $3.877s for demand
sterling. There were times during the
day when the market in London, where
the weakness first developed, was
swamped with offerings. Offerings at
one stage of approximately 1000 900
worth Of sterling bills in London bv a
New York banking institution were
placed at concession of two cents in
the pound. The weakness was almost
entirely in spot exchange, the rates for
futures holding up fairly we'll. This
indicated that the transaction was to
provide funds for immediate use. The
declines in sterling affected the other
exchanges, which were generally lower.
German marks closed "a points off
at 1.59 cents.
While international bankers on this
sloe OF the water were without specific
Information relative to the exact
nature OF the German transactions, the
financial experts in Wall Street who
have their fingers on the pulse of the
worlds markets, as expressed in the
rise and fall in exchange quotations
az the different financial centers, said
the German government was selling
sterling and other foreign currencies
IN London and converting the proceeds
into American dollars to provide the
funds needed to meet the dollar drafts
to be turned over to the Reparations
Commission to-day.
According to the program, as out
lined in the cables from Berlin, the
German government is turning over to
the Reparations Commission in Paris
to-day twenty German Treasury bills
bearing the Endorsement of leading
German banks of $1000O,0O0 each. the
equivalent of 84O,000,0O0 gold marks.
OF this $200,000,000 approximately $780,
100000 is payable in New York.
The operations carried on through
the medium of the exchange market in
London yesterday were apparently, the
bankers said, for the purpose of OBJ
tanning the dollar exchange required
to meet the $80,GO0,O0O German Treas
ury draft payable here. The Germans
first began to sell exchange earlier in
the week, according to the exchange
dealers, but the bulk of the offerings
did not come upon the market until
Thursday and yesterday.
For more than a year it has been
known that the German government
has. been accommodating balances in
various parts of the world, most of
which were in the form of sterling, but
q part OF which were also in other
forms of. exchange, such as Italian
lire, Dutch guilders, French francs,
Swiss francs, Spanish pesetas and
Swedish kronen. The conversion of
these different forms of exchange into
dollars was arranged through London
as the worlds financial center. Sterling
balances were probably converted d.
rectly into dollars, the bankers said,
while pesetas, francs, guilders and
kronen were likely converted into
sterling and then into dollars.
Germany has also accumulated bal
ances here since the end of the war,
and portion of these, it is believed,
have gone to swell the total of funds
built up recently to meet the repara-
tions payment.
Sterling exchange up to this week
had since the autumn of last year ex-
hibited rising strength, and only a
fortnight ago the demand rate on Lon
don had climbed a fraction above Sd
to the pound. The record low was
$3.18 made in February, 1920. Sterling
decline this week 1915 cents.