CYPHER/CAT A
IMMEDIATE GOVERNOR HONG KONG
TELEGRAM NUMBER
409
CONFIDENTIAL
18
TO FOREIGN AND COMMONWEALTH OFFICE
20 MAY 1969
CONFIDENTIAL
TELEGRAM 409 OF 20 MAY.
STERLING.
THE HONG KONG AND SHANGHAI BANK HAVE DECIDED TO SUSPEND FURTHER
FORWARD PURCHASES OF STERLING AGAINST EXPORT CONTRACTS. THE
EXCHANGE BANKS' ASSOCIATION WILL PROBABLY MAKE AN ANNOUNCEMENT THIS
AFTERNOON ADVISING MEMBERS TO FOLLOW THE HONG KONG BANK'S LEAD TO
THE EXTENT NECESSARY TO KEEP THEIR FORWARD POSITIONS SQUARE. THEY
WILL PROBABLY ADVISE EXPORTERS, AND OTHERS IN A SIMILAR POSITION WHO
REQUIRE EXCHANGE COVER, TO INCLUDE A REVALUATION CLAUSE IN STERLING
CONTRACTS OR TO CONTRACT IN TERMS OF U.S. DOLLARS.
2. BANKS ARE FINDING THAT IN PRESENT STATE OF EXCHANGE MARKETS
IMPORTERS ARE POSTPONING FORWARD PURCHASES (REQUIRED BY BANKS ON
expatus sue OPENING L/CS UNDER PROCEDURE INTRODUCED LAST YEAR) AND ADVANCING
FORWARD SALES, SO THAT FORWARD POSITIONS WHICH PREVIOUSLY REMAINED
rebous at REASONABLY BALANCED HAVE BECOME INCREASINGLY OVERSOLD. THEY ARE
NO LONGER PREPARED TO TAKE THE EXCHANGE RISK INVOLVED.
SIR D.TRENCH.
FCO/WH DISTRIBUTION
ADVANCE COPIES SENT
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