Evening star., 1933-08-29
ORE|GNEXCHANGE
HARD TO APPRA|SE
Pounds Decline and Doubts
on Franc May Forecast
Imitation Race.
BY GEORGE T. HUGHES.
Special Dispatch to The staI

Special Dispatch to The Star.
NEW YORK, August 20 (N.AN.A).-
AS stock market influence. the move
ment Of the foreign exchanges becomes
daily more difncult to appraise.
Traders used to have simple formula
for guiding their operations. II sterling
were advancing, it was bullish on the
stock market, and If sterling were de-
clining 1t was bearish. Or, to put 1t the
other way, II the dollar we're appreciat-
ing In terms Of the pound, stocks should
be sold; If 1t were depreciating in rela-
ton to sterling, stocks should be bought
That was defensible as long as the
sterling franc rate was relatively stable.
While the gold value Of sterling as
measured by the French franc fluc-
tuated within narrow limits, it was true
that changes in the dollar sterling rate
measured the rise and fall Of the gold
value Of the dollar and 80 Of the worth
Of stocks on an imitation basis. But now
sterling Is breaking away from the franc,
to which 1t was practically "pegged"
for so long, and Is itself depreciating
in gold value. 1t looks as II sterling
would follow the dollar downward
Francs Future In Doubt
That being the case, it would be
simple matter to take the dollar franc
rate as expressive of the imitation out
look, as estimated by the exchange mar
kets. were 1t not for q fresh complica-
tion. Doubts have arisen regarding the
strength Of the tie Of the franc to gold.
The French government has an enor-
nous deficit with which to struggle.
French fnanciers are alarmed over the
downward course of the dollar and the
pound and are not at all sure that
France will not also have to abandon
gold in order to compete with Great
Britain and America in the world trade
market.
To devalorize the franc again would
be considered little short of national
disaster In France, and conceivably
might bring grave political disturb
ances What the effect would be on the
international exchange value Of these
three currencies If the franc were di-
vorced from gold, no one can say posi-
lively.
One conjecture can be hazarded. II
the franc were turned loose from gold
and if France, Britain and America
were to indulge in race to see which
could debase its currency the most, the
chances are that the dollar would come
out the loser. The dollar is intrinsically
stronger than the pound or the franc.
Critical Points Cited.
ut is depressed now more because OF
fear of what might happen il currency
imitation were resorted to than because
Of anything that has happened so far.
Heroic measures would be necessary to
keep the dollar down If sterling and the
franc should desire to put the matter
to test.
It may be interesting to set down
here the critical points, so that the
reader may watch for himself Sterling
touched its low. measured by franc, on
November 20, 1882. when the quotation
was 80k francs to the pound. Up to
very recently the sterling-franc rate
held between IS and 86. but 10 days
ago 1t began to drop and Monday was
under 50 in London. The franc reached
its high in dollars at 5.72A cents on
July 10, last, when the stock market was
On the point Of breaking. 1t was around
556 cents Monday.
(Copyright. 1888, by North American News
paper Alliance. Inc.)