The United Kingdom currency, the pound sterling, recovered slightly in foreign exchange markets in London on Tuesday (9 March) after Monday's (8 March) four cent loss against the U.
CU British news-paper headlines on sterling crisis. (4 shots)
Background: The United Kingdom currency, the pound sterling, recovered slightly in foreign exchange markets in London on Tuesday (9 March) after Monday's (8 March) four cent loss against the U.S. dollar.
The pound also held up in other European foreign exchange centres, including Frankfurt, Paris and Rome. Foreign exchange markets were quieter with dealers speculating whether the British Government and the Bank of England would not intervene to save the pound from sliding even further.
On the whole, compared with trading last Friday and on Monday, sterling managed to hold its own. After failing to a record 33.1 per cent against other major currencies, sterling recovered to 33.0 per cent.
In Frankfurt, sterling also moved up slightly to just over five marks to the pound., The british currency was quoted at 5.015 arks compared with its closed rate of 4.985 marks on Monday night, the first time it had ever fallen below the five mark level.
In Paris the franc remained firm on Tuesday with no reports of significant Bank of France intervention. In fact the franc was boosted by a rise in domestic money market rates, and strengthened slightly against the West German mark to reach 176.25 francs against 100 marks, compared to the Monday night closing rate of 176.425 francs.
Foreign exchange dealers and banks in Rome had good reason to feel nervous on tuesday. As dealers there explained, the lire has suffered a severe attack of speculation against it. And the fall of sterling threatens to place further strains on the Italian currency.
Italy's foreign exchange markets only re-opened after a forty day closure caused by the falling lire. But there was some cheerful news for Italians - the visit of the United States Treasury Secretary, Mr. William Simon, for talks on the economic crisis with the Italian Government, appeared to have calmed the market and halted the lire's slide. The lire lost four per cent of its value last week to drop 16 per cent below its rate on the 21 of January.
Meanwhile, Nigeria cleared up some of the mystery surrounding the present sterling crisis when ti confirmed that it sold substantial amounts of sterling last week.
However, financial experts in London have said that the British Government is not unduly concerned by the fall of sterling because it wants to see the U.K.'s exports remain competitive. An this view was confirmed by the respected London based National Institute Economic Review. It says that the U.K. will need to let sterling lose five per cent of its value this year to keep export prices low.
SYNOPSIS: The City of London, one of the world's major foreign exchange centres which was calmer on tuesday over the latest crisis in the pound sterling.
Money markets around Europe reported that sterling was holding steady, after the record losses of the past few days. The pound recovered slightly after filling 33.1 per cent against other major currencies.
In Frankfurt, sterling also held its own, improving on Monday's trading when, for the first time ever, it fall below five marks to the pound. However, it came back to finish just over five marks on tuesday.
In Paris, trading was encouraging for the French currency o-- the franc West German mark. The move was signalled by a boost in domestic money market rates.
Rome's foreign exchange dealers had good reason to feel nervous. As dealers explained the lire has suffered a severe attack from speculative dealings, and the fall of sterling threatens to place further strains on the currency. However, the market appeared calm.