LONDON AND PARIS EXPLAIN THE RISE OF POUND AND FRANC

THE gradual character of the upward movement in the principal European exchanges is less spectacular but, in the opinion of foreign observers, it is more significant than any spasmodic sudden rise would be. Last week the pound went up to $4.36, which is within sight of the par Value of $4.8665. The previous week it had been $4.25, as compared with $3.79 a year before. Likewise, the franc which has been slowly climbing during the last three weeks from .082 to .0841, and on to .0858. shows a marked improvement over the figure of .068, of January 1921. Similar improvement is shown in the Belgian franc and the Italian lira. In Paris, says a New York Times correspondent, it is felt that the most important influence on foreign exchange rates is the apparent ability of the new French Minister of Finance to effect the great economies in the budget which he promises. And we are assured that ‘no apprehension is felt in financial circles here as to the maintenance of satisfactory foreign relations by the Poincare Cabinet.” In explaining the recent rise of sterling in New York, the London financial correspondent of the New York Times gives first place “to the great alteration in favor of Great Britain of the trade balance between England and America.”

As American business men are well aware, the shrinkage in merchandise business between the two countries, both in quantity and value, has been almost sensational, and its result has been immense reduction of the excess of imports. Without this solid basis of improvement in England’s economic position, the other factors alone could not have accomplished the restoration of sterling to the highest rate quoted for two and a half years.

In redeeming such of its external loans as are falling due in America, Great Britain has, we are told, “put one peg in the ladder by which sterling has been climbing.” But the final and most powerful touch has been given by the achievement of the Naval Disarmament Conference. This “has provided a lifting power for international exchange which would be difficult to exaggerate.” The London writer says further:

Nor must one overlook the importance of the progress made toward helping the position of European nations indebted to the United States Treasury through the medium of funding their obligations. This is recognized as a great step forward, inasmuch as it converts what is now a debt payable on demand to long-term obligations, thus definitely removing from the political arena the question in its most awkward form. It is doubtful whether sterling could possibly have risen to its present level but for the naval agreement and the passing of the refunding bill.

Source: Literary Digest, Feb 18 1922