Bank Exchange Rates.

Taranaki Daily News, Volume XLVI, Issue 233, 6 October 1904, Page 2

Bank Exchange Rates.

REASONS KOH Till? ALTERATIONS. It was announced on Saturday til'al tile bank rates of exchange on London luui been induced as follows temporarily Demand—Buying, discount to par ; selling, premium, 12s Ud. Thirty days' sight : Selling, premium 7s 6d. Sixty (lays' sight : Selling, premium 12s (kl ; buying discount, 2s 6d ; telegraphic, 17s (xl. The old rates, which have now been altered, are :—Demand : Buying, 7s Cd ; selling, £1 ss. Thirty days' sight: ltuying, 12s (kl ; seli;ng, £l. Sixty days' sight : Buying, 17s Cd; selling, 15s; telegraphic, Jtl. ss.

Knowing Hint J]i' Donald Ifoid, the member lor Taieri, takes a special interest in such mutters, the New Zealand liei-ald correspondent interviewed him on the subject. He said he had noticed that the banks had offered much cheaper rates for the sale of bank credits on J,otu!on. But they buy exchange at much cheaper rates also," 1 pointed out. ' That is so," he replied, " but it means very little. What they oiler to sell exchange at binds them. Each buying transaction is- a special transaction, and they can raise the rate ii they like, but they cannot raise the selling rate without a breach of faith."

What doiw this fall mean ; has it any signilitauco was the next question.

" Yes," replied Mr lteid, it has great significance. IJuring the months of October and November the London market is generally at its highest, and the discount rates in tlie.se months are high. When t. le rules are very high in London creditors there prefer to draw on their colonial debtors, and these drafts would havo to be met in the colonies, which might probably a!Vect the bank reserves in the colony. ]f they can induce merchants to arrange their exchanges forward it will prevent any London stringency from affecting them, as they could prearrange matters- in London."

" The low rates are said to be temporary only ?"

" Yes ; that is, they nre intended to cover the time o[ higi'i rates in London."

W'hy do you say that the buy ing rales are not important?"

Well, it is because fie selling rates for exchange uiv the more important. We are a debtor colony, and all tho surplus end.ls we have are wanted to meet our engagements in London. We require over X 3,000,000 a year in London to meet our interest engagements there (public and. private), so that, those who have credits in London know that the banks will require them all, and must buy them. They are not tied to purchases of exchange, and their advertised rules, but tivey are tied to their selling rales." " Have we enough io meet these engagements l ?"

f ' Well, we have to meet them out of the surpluses from our exports, after paying for imports, and they are all wanUs! to keep our engagements!; indeed, it is a question if they are sullicient."

"Then this alteration in the ratys is due to a prospect of stringency in the money market during the next two months in London ?" Yes, that isi so. It is a device to provide against tight money in London. and t<> prevent the colonial banks from Ik'ing injuriously affected thereby."