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CONFIDENTIAL
(A) HONG KONG'S PARTICIPATION IN THE GUARANTEE IS BASED ON THE RESERVE POSITION AT THE EXPIRY OF THE FORMER AGREEMENT, BUT WITH ADJUSTMENTS MADE TO TAKE ACCOUNT OF THE NON-PARTICIPATION OF THE BANKS IN THE NEW ARRANGEMENT. OVER AND ABOVE THAT POSITION HONG KONG IS FREE TO PURCHASE ANY FOREIGN CURRENCY:
(B) THERE HAS BEEN EVERY INCENTIVE FOR THE HONG KONG GOVERNMENT TO OBTAIN A GUARANTEE FOR OUR STERLING HOLDINGS BECAUSE, IN ADDITION TO THE RECENT FALL IN THE STERLING EXCAHNGE RATE AGAINST THE U.S. DOLLAR, CURRENT PRICES OF GILT EDGED SECURITIES IN LONDON ARE DEPRESSED AND IT WOULD NOT BE IN HONG KONG'S INTEREST TO SELL STERLING SECURITIES, AT LEAST FOR THE NEXT FEW MONTHS:
نید کاره
(C) ACCRUALS FROM INTEREST RECEIPTS DO NOT NECESSARILY HAVE TO BE RETAINED IN STERLING, BUT CAN BE USED FOR INCREASING THE GOVERNMENT'S NON-STERLING FOREIGN CURRENCY HOLDINGS:
D) AS REGARDS THE LONGER TERM, VIEWS HAVE BEEN SOUGHT BY THE BRITISH GOVERNMENT FROM ALL PARTICIPATING COUNTRIES CONCERNING WHAT ARRANGEMENTS FOR THE STERLING BALANCES MIGHT BE APPROPRIATE AFTER THE END OF MARCH. THE HONG KONG GOVERNMENT IS ACTIVELY
ENGAGAED IN THESE EXCHANGES:
(E) ALL IN ALL, WE ARE QUITE SATISIFIED THAT HONG KONG HAS BEEN FAIRLY TREATED, GIVEN THE CURRENT INTERNATIONAL MONETARY TURMOIL AND, ALTHOUGH THERE IS A RISK IN TAKING A VIEW ON ANY CURRENCY AT THE PRESENT TIME, A GUARANTEE IN TERMS OF THE U.S. DOLLAR WOULD SEEM TO PROVIDE THE MOST CHANCE OF MAINTAINING THE EXCHANGE VALUE OF OUR RESERVES DURING THE NEXT FEW MONTHS.
3. I SHOULD BE GRATEFUL FOR ANY COMMENTS YOU MAY HAVE ON THE FOREGOING BY 0900 HOURS HONG KONG TIME ON 15 DECEMBER.
MACLEHO SE
ORWELL DISTRIBUTION
FRD.
HKIOD
NEWS DEPT
CONFIDENTIAL