5. THROUGHOUT THE MONTH THERE WAS A DISCOUNT ON 3-MONTH-FORWARD STERLING: AT THE CLOSE ON 31 JULY IT WAS 3 1/4 PER CENT PER ANNUM. TAKING ACCOUNT OF THE DISCOUNT THE 3 MONTH COVERED UK INTER-BANK/ EURO-DOLLAR COMPARISON WAS AGAINST STERLING THROUGHOUT THE MONTH,
6. (UNATTRIBUTABLE).
STERLING'S EFFECTIVE DEPRECIATION WAS AROUND 14 1/2 PER CENT AT THE BEGINNING OF THE MONTH. THIS HAD INCREASED TO OVER 18 PER CENT BY 6 JULY: MOST MAJOR CURRENCIES HAD STRENGTHENED AGAINST THE DOLLAR AND STERLING HAD WEAKENED. DURING MUCH OF THE REMAINDER OF THE MONTH THE EFFECTIVE DEPRECIATION RANGED BETWEEN 15 1/2 PERCENT AND 19 PER CENT. AT THE CLOSE ON 31 JULY THE EFFECTIVE DEPRECIATION
WAS 17.71 PERCENT.
7.
Q.1
NOTES FOR QUESTIONS (UNATTRIBUTABLE),
DOES THIS MEAN YOU INTERVENED TO THE EXTENT OF AROUND DOLLARS
700 MILLION?
A. 1
Q.2
NO. THERE ARE OTHER TRANSACTIONS BESIDES INTERVENTION. BUT THERE MUST HAVE BEEN INTERVENTION?
A.2 YES. THERE HAS BEEN. DETAILS CANNOT BE GIVEN FOR OBVIOUS OPERATIONAL REASONS. BUT THE CHANCELLOR SAID AT HIS PRESS CONFERENCE WITH THE GENERAL SECRETARY OF THE TUC ON 27 JULY THAT HE WOULD NOT HESITATE TO USE THE RESERVES IF NECESSARY. 8. THE TRANSCRIPT OF THE PRESS CONFERENCE SAYS: QUESTION: DID YOUR EARLIER ANSWER ON THIS POINT MEAN THAT YOU THINK THAT THE WEAKNESS OF STERLING IS SOLELY A QUESTION OF INTEREST RATE DIFFERENTIALS, A RATHER TECHNICAL POINT, AND IF YOU THINK THAT HOW FAR WOULD YOU BE PREPARED TO USE THE RESERVES TO
SUPPORT IT?
MR BARBER: WELL, OF COURSE, AS FAR AS THE TREND IN THE EXCHANGE RATE IS CONCERNED, PEOPLE HAVE THEIR OWN IDEAS AS TO THE CAUSES, BUT I THINK THERE CAN BE NO DOUBT AT ALL THAT ONE CAUSE OF MAJOR IMPORTANCE WAS THE DIFFERENTIAL IN INTEREST RATES BETWEEN THIS COUNTRY AND FOREIGN INTEREST RATES. AS FAR AS THE USE OF OUR RESERVES IS CONCERNED, CERTAINLY I WOULDN'T HESITATE TO USE OUR AMPLE RESERVES IF THIS IS NECESSARY TO PROTECT THE ECONOMY FROM UNJUSTIFIED FALLS IN THE EXCHANGE RATE. AFTER ALL, THAT IS WHAT RESERVES ARE FOR. QUESTION: WHEN DOES IT BECOME NECESSARY? AT WHAT POINT?
MR BARBER: WELL OBVIOUSLY, NO CHANCELLOR WOULD ANSWER A QUESTION
LIKE THAT.
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