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HK DAF
Brefun Susta
THE TIMES
cutting dated
29 SEP 1973
19
H.RKS
Doubt over Hongkong balances hits sterling
By Melvyn Westlake
Fears that Hongkong might reject the British terms for maintaining a minimum level of their sterling balances in Lon- don produced an initial sharp fall in the pound on the currency markets yesterday.
Reports from the Nairobi annual meeting of the Interna- tional Monetary Fund suggested that Hongkong was certain to refuse the new terms that were
pilaterally announced by the British Treasury on September 6. Hongkong's balances are about one-quarter of the £3,000m official sterling balances held in London and withdrawal of
these funds could lead to a fresh
sterling crisis on the exchanges forcing other official holders to withdraw their balances,
In mar! et trading the value of the pound fell to $2.4030 against the dollar, but recovered partially to close at $2.4135, down a net 0.65 cent. Dealers believed that the Bank of England might have intervened.
The effective devaluation of the pound from its Smithsonian parities was 19.7 per cent last, night, compared with 19.3 per cent a week ago.
In Hongkong, the Financial Secretary, Mr Philip Paddon. Cave, said no decision had been taken on Britain's proposal o extend the guarantee on the Colony's sterling reserves. He reiterated the comments he made on his retura from Nairobi
that "* 'Hongkong has not made “up its mind”.
"We are still keenly interested in exchange stabi lity", he told Reuter. If Hong- kong took any precipitate action, it could negate the British guarantee and lead to a run on the pound which could affect the value of any remainir e balances the colony still held in sterling.
Whitehall was playing down the reports yesterday. Officials noted Mr Haddon-Cave's interest in maintaining stability. They said that the general response to the new British guarantee terms had not been unfavourable.
The guarantee arrangements, September 24. But because of first agreed in 1968, fell due on pressure on the pound early this month, the Government an- nounced the new terms before consultations had taken place.
Overseas sterling balances re- ceive a value guarantee pro- vided a minimum proportion continues to be held in sterling. The guarantee rate is $2.4123. If the exchange is lower than this on average over the_next six months, Britain will make up the difference.
Chinese demands: China has demanded the eviction of world's two Taiwan from the main financial institutions, the International Monetary Fund and the World Bank.
This was confirmed in Nairobi yesterday by the fund's new managing director, Dr Johannes Witteveen, at the close of the IMF conference.
Leading --timło
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