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2.
The following from Clare & Crump on Foreign Exchange
pp.84/5 puts it clearly
"Forward dealing is occasionally condemned as being a form
of speculation. The answer to that complaint is that it all depends on circumstances. If it is carried out in connection
with a genuine transaction, so far from being a gamble, enough
has been said to show that it is a very potent means of
insurance.
If on the other hand it has no real basis, but
is carried out in the hope that the currency to be delivered
can be obtained more cheaply at a future date, then there is
no defence to the charge".
I submit that where an immediate decision is essential
full discretion must be retained locally and no settled policy
laid down.
As regards Accounting, paragraphs 8 to 11 of the Auditor's memorandum show him to be in agreement with the present practice of the Treasury and I do not agree with the D.C.A's remarks in the first part of paragraph 3, to the effect that a profit or loss occurs on the day of remittance, but, admitting his view for the purpose of argument, how is he going to measure
the "profit or loss"? He mentions "the rate ruling at the
date of the transaction" but a fair definition of this would be
difficult to find. The Bank's opening rate is disqualified at
once, for it is admitted that we can always get better terms.
When there are violent exchange fluctuations different rates are quoted by different banks simultaneously, and the rate from any one bank might change a dozen times in a day. It might be
influenced by the suspicion that we were asking for a rate
without intending to do business. However, the fact is that no profit or loss can occur until the money remitted is converted
into goods or services.
(sd.) Edwin Taylor.
Treasurer.
15. 5. 33.
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