IMMEDIATE
GRS 606
i
CYPHER/CAT A
SECRET
FM HONG KONG 126910Z
SECRET [ORWELL]
TO IMMEDIATE F C O TELNO 761 OF 12TH JULY, 1973.
YOUR TELEGRAM NUMBER 675.
LA
R!
REF.
U.S. DOLLAR CRISIS AND STERLING GUARANTEE AGREEMENT.
YOUR PARAGRAPH 2: WE SHALL RESTORE OUR M.S.P. AS SOON AS
POSSIBLE AND NO LATER THAN 31ST AUGUST (BY WHICH TIME THE STERLING GUARANTEE AGREEMENT WILL HAVE LESS THAN 30 DAYS TO RUN) BUT,
AS LONG AS FOREIGN EXCHANGE MARKETS REMAIN SO NERVOUS, IT IS
IMPOSSIBLE FOR US TO UNDERTAKE NOT TO BREACH CUR M.S.P. FURTHER FOR
A FEW DAYS OR SO, YOU WILL APPRECIATE THAT WE CANNOT INCREASE OUR M.S.P. IN ORDER TO ANTICIPATE AN INFLOW OF U.S. DOLLARS/ AND, WHILE THE HONG KONG DOLLARS IS STRONG IN RELATION TO THE U.S.
DOLLAR, IT IS BOUND TO TAKE TIME TO CORRECT ANY REDUCTION IN OUR M.S.P. AS A RESULT OF SUCH AN INFLOW. AN ALTERNATIVE WOULD BE FOR
THE AGREEMENT TO BE AMENDED SO THAT ANY U.S. DOLLARS ACQUIRED AS -
A RESULT OF SUPPORT OPERATIONS AND SWITCHED, INTO STERLING WERE
GUARANTEED AT THE RATE OF THE DAY, THIS WOULD HELP US TO JUSTIFY A BUILD UP OF OUR STERLING RESERVES AT A TIME WHEN LOCAL OPINION
WOULD EXPECT THEM TO BE REDUCED BECAUSE THE AGREEMENT PERIOD WAS
RUNNING OUT.
2.
YOUR PARAGRAPH 3: THE INFLOW OF CHEAP U.S. DOLLARS SO FAR EXPERIENCED DOES NOT JUSTIFY A FLOATING OF THE HONG KONG DOLLAR (WHICH WOULD BE TROUBLESOME FOR OUR TRADE ORIENTED ECONOMY) :
AND OUR CONSIDERED VIEW IS THAT A CENTRAL RATE FOR THE HONG KONG
DOLLAR OF US DOLLAR 1 = HK DOLLARS 5.0853 IS STILL ABOUR RIGHT.
3. BUT OCCASIONAL FLURRIES OF ACTIVITY ON THE LOCAL FOREIGN
EXCHANGE MARKET AND THE CORRECT RATE, IN TERMS OF TRADING CONSIDER- ATIONS, FOR THE HONG KONG DOLLAR ARE, BY NO MEANS, OUR MAJOR PREOCCUPATIONS AT THE MOMENT. IT IS THE CONTINUING UNCERTAINTY
SECRET
/ABOUT
DA
The Goodfellow
To see
6.1.
Prill 1312