TNAG-0381-FCO40-427-Sterling-assets-and-balance-of-payments-of-Hong-Kong-1973 — Page 170

SECRET

For discussion

on 2nd October 1973

XCS(73)9)

No 3.7.

Copy No

MEMORANDUM FOR EXECUTIVE COUNCIL

MANAGEMENT AND SECURITY OF HONG KONG'S STERLING RESERVES

Introduction

At Annex A is a copy of the message the Chancellor of the Exchequer sent to all sterling agreement countries on 6th September. It contained an undertaking to maintain for about six months from 25th September 1973, that is to say, the day after the present Sterling Guarantee Agreements expired, the US dollar value of eligible sterling balances at US$2, 4213 to £1. This message was followed by a despatch to the Acting Governor from the Secretary of State under cover of which he forwarded the text of a Declaration. B & C These two documents are at Annexes B and C respectively.

Main Points in Declaration

2

Government

(a)

and states

(b)

The Declaration contains an undertaking by the British

to maintain the US dollar value of eligible sterling balances at a guarantee rate of US$2.4213 to £1 for the period 25th September 1973 to 29th March 1974;

that the guarantee will be implemented if, during this period, the average of the daily rates notified to the International Monetary Fund by the Bank of England is lower than US$2, 4213 to £1;

and further states

(c)

(d)

that the guarantee will apply to eligible sterling balances (defined as net of forward sales) at the close on 24th September 1973 or 29th March 1974, whichever is the lower; and

that the amount due under the guarantee will be calculated on the basis of the difference between the average rate and US$2.4213.

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