XN000022-1974-11-25 — Page 2

HATAY, NOVEMBER 25, 1974.

HC KONG DOLLAR TO FLOAT

X X X X

A GOVERNMENT SPOKESMAN ANNOUNCED THIS EVENING THAT, IN VIEW OF THE UNCERTAIN TRADING CONDITIONS NOW BEING EXPERIENCED ON THE FOREIGN EXCHANGE MARKET, THE HONG KONG DOLLAR WOULD NOT BE MAINTAINED, FOR THE TIME BEING, BETWEEN THE PERMITTED MARGINS OF HK$4.9706 AND HK$5.1994 TO US$1.

THE SPOKESMAN RECALLED THAT THE PRESENT CENTRAL RATE OF HK$5.085 TO US$1 WAS SET IN FEBRUARY 1973 AND THE RATE HAD BEEN MAINTAINED WITHIN 2-1/4% ON EITHER SIDE OF THIS CENTRAL RATE FOR THE PAST 21 MONTHS, HE SAID THAT THE US DOLLAR HAD BEEN STEADILY WEAKENING AGAINST THE HONG KONG DOLLAR FOR SOME TIME, EUT THE RATE HAD NOT APPROACHED THE UPPER LIMIT OF HK$4.9706 UNTIL RECENTLY. THE GOVERNMENT HAD THEN BEEN FORCED TO INTERVENE ON A SUBSTANTIAL SCALE IN ORDER TO MEET ITS OBLIGATIONS UNDER THE RULES OF THE INTERNATIONAL MONETARY FUND. HOWEVER, THE SPOKESMAN ADDED, IN VIEW OF THE SELLING OF US DOLLARS THAT HAD DEVELOPED IN THE LAST FEW DAYS, THE GOVERNMENT HAD DECIDED NOT TO COMMIT STILL FURTHER RESOURCES IN ORDER TO MAINTAIN THE RATE BELOW THE UPPER LIMIT.

COMMENTING ON THIS DECISION, THE FINANCIAL SECRETARY, MR. C.P. HADDON-CAVE, SAID THAT, AS A FIXED RATE FOR THE HONG KONG DOLLAR WAS MORE CONVENIENT FOR EXPORTERS AND INDUSTRIALISTS, THE GOVERNMENT WOULD CONSIDER RE-ESTABLISHING A CENTRAL RATE WITH THE NORMAL OBLIGATION TO MAINTAIN MARKET RATES WITHIN 2-1/4% ON EITHER SIDE AS SOON AS CONDITIONS PERMITTED. WHILE RECOGNISING THAT A STRONGER HONG KONG DOLLAR WOULD AFFECT THE COMPETITIVENESS OF HONG KONG EXPORTS, PARTICULARLY IN THE U.S. MARKET, MR. HADDON- CAVE SAID THAT AN OFFSETTING BENEFIT WOULD BE A REDUCTION IN THE HONG KONG DOLLAR COST OF IMPORTS. HOWEVER, HE ADDED, +ONCE THE FOREIGN EXCHANGE MARKET HAS SETTLED DOWN AND MORE NORMAL TRADING CONDITIONS PREVAIL, I DO NOT THINK WE SHALL SEE A RATE FOR THE HONG KONG DOLLAR ESTABLISHED WHICH WILL MATERIALLY ALTER OUR OVERALL TRADING PROSPECTS+.

12