SECRET
permitting Australia to continue to convert foreign exchange holdings at parity rates for the purpose of satisfying the MSF obligation (thereby removing any need for sterling purchaseg in the market) while continuing to provide that the calculation of eny sterling amounts that become payable would be on u market
rate conversion basis.
5. Australian officials have indicated that Australia would
participate in the arrangement with a compromise on these linco and it seems appropriate that this be offered.
Ireland
6.
Ireland has a problem similar to that of Australia oo
result of the change in the currency valuation basis. A difference is that, whereas Australia conventionally converts on a parity basis, Ireland's practice has been to convert foreign exchange holdings on the basis of a book valuation which is brought broadly into line with current market rates twice-yearly, This difference is, however, of little practical importance and it would be appropriate to offer Ireland a compromise formula similar to that envisaged for Australia. This should induce the Irish to participate in the arrangement, though we havg rol
yet had confirmation that they will.
7. No other holders have complained at the change in the currency conversion basis between the former Agreements and the present arrangement, and there seems no reason to offer the modification proposed for Australia and Ireland where it han nok been sought, especially since this could result in selling of sterling in some cases.
Hong Kong
8. The former Agreement with Hong Kong applied to the sterlin holdings of both the Government and the commercial banks, with the Hong Kong Government drawing the benefit of HG's guaranten payments on the commercial bank as well as official holding but,
in turn, extending a Hong Kong dollar guarantee on the commercial
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