TNAG-0448-FCO40-513-Sterling-assets-and-balance-of-payments-of-Hong-Kong-1974 — Page 204

CONFIDENTIAL

THE

CELLOR OF

EXCHEQU

7. In addition, I propose that the new guarantee

should be expressed in terms of the effective rate for

sterling rather than the dollar, principally on the

ground that in present circumstances the effective rate

gives a better measure of the value of sterling than a

single currency. This should also be cheaper than a

dollar guarantee over the next 9 months.

8. If you agree, I will inform participants in the

present arrangement of the new guarantee within the next

few days. From the point of view of confidence in

sterling, it would be desirable to announce the new

guarantee publicly soon after. The market may become

concerned about sterling if it thinks that the guarantee

will expire at the end of March and that the participants

will noon therefore be likely to move out of nterting.

I realise however the difficulties about an announcement

of this kind so near to the Election day.

9.

I am copying this minute to the Foreign and

Commonwealth Secretary.

BB

1974.

18" February

CONFIDENTIAL