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CONFIDENTIAL
known that the UK were refusing to raise the limit this could also be damaging politically.
10. We have told Hong Kong that we are not
prepared for the Exchange Fund limit to be
exceeded administratively, without our consent, However we have amplissid that...
and that we will consider her request urgently
HK's
A
We are disaussing proposals to limit the
danger referred to in paragraph 5 above with the Hong Kong authorities by telegram and it is probable that sir J. Cowperthwaite will come
to London for discussions in the near future
with the FCO and particularly the Treasury (who are in the lead in this matter).
11.
There the matter rests at present.
Mr. Fogarty, Treasury Representative in 3.4.
Asia is due to pay Hong Kong a visit from
it the same
nerat
29 May to 6 June and will be ther at
time as the Minister. He will no doubt be
discussing this highly contentious question
with the Hong Kong authorities if the Financial
Secretary has not resolved it by a trip to
London. It is suggested that you and the Minister should avoid discussion of these vig
Eichnical issues.
12.
A further point. The Hong Kong
commercial banks have recently suspended dealing
They have done
in the Hong Kong forward market.
this because they have not been able to maintain
covered positions; more people wished to sell
than to buy sterling foward. The Boblem was made greater by the fact that foward deals were done at fixed tariffs which did not respond to
market pressures. But despite a reference by
/the Exchange
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