PARIS BOURSE; COINS ON DISPLAY; MEN INTO BOURSE; BROKERS WORKING ON FLOOR OF BOURSE; PARIS BANK; PEOPLE INTO BANK; BANK OF ENGLAND; BANK BUILDINGS; PEOPLE INTO BANK; DELEGATES; SCHILLER; WITTEVEEN; D'ESTING; SEDATI; CONFERENCE.




Initials JH/V-VS/PN/OS



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Background: THE DEVALUED FRENCH FRANC STOOD UP STRONGLY TO ITS FIRST TEST ON THE FOREIGN EXCHANGE MARKET IN PARIS TODAY (MONDAY) WHILE IN LONDON, STERLING TUMBLED AN HOUR BEFORE THE CITY'S EXCHANGE CLOSED. COMMON MARKET FINANCE MINISTERS MET IN BRUSSELS DURING THE DAY AND IN EFFECT PROPOSED A TEMPORARY SUSPENSION OF THE SIX-NATIONS' COMMON AGRICULTURE POLICY. INFORMED SOURCES SAID.

FRANCE DEVALUED BY 12.5 PER CENT LAST FRIDAY (8 AUGUST) EVENING, AND TODAY WAS THE FIRST DAY THAT THE FOREIGN EXCHANGE MARKETS WERE OPEN. THE FRANC STOOD UP WELL IN PARIS. THE CURRENCY CLOSED AT 5.54350 TO 5.54650 AGAINST THE U.S. DOLLAR COMPARED WITH THE OFFICIAL CENTRAL PARITY OF 5.55419 FRANC TO THE U.S. DOLLAR.

THIS SHOWED THE STRENGTH OF THE DEVALUED FRANC BECAUSE DEALERS HAD TO PAY FEWER FRANCS FOR A U.S. DOLLAR THAN THEY WOULD HAVE HAD TO PAY AT THE OFFICIAL CENTRAL PARITY RATE.

IN SOME PARIS BANKS, IT WAS REPORTED, PEOPLE WERE CHANGING CURRENCIES.

STERLING, AFTER STANDING UP FOR SEVEN HOURS ON THE LONDON MARKET TODAY TO THE EFFECTS OF THE DEVALUATION OF THE FRANC, TUMBLED AN HOUR BEFORE THE EXCHANGE CLOSED FORM 2.3858 TO 2.3830 AGAINST THE U.S. DOLLAR. THE FALL WAS BELIEVED TO HAVE BEEN CAUSED BY PROFESSIONAL OPERATORS WHO WERE ANXIOUS NOT TO BE LEFT HOLDING TOO MUCH CURRENCY OVERNIGHT.

IN BRUSSELS, THE COMMON MARKET EXECUTIVE COMMISSION, GUARDIANS OF THE COMMUNITY'S ROME TREATY, SUGGESTED THAT THE FRENCH FARM MARKET BE ISOLATED FROM THAT OF ITS PARTNERS FOR ABOUT 28 MONTHS, THUS, ENDING THE UNIFORM PRICE SYSTEM. THE MEETING WAS ATTENDED BY COMMUNITY FINANCE AND AGRICULTURE MINISTERS CALLED TO EXAMINE MEASURES NEEDED FOR THE MARKET'S FARM POLICY FOLLOWING THE SHOCK DEVALUATION OF THE FRANC.

THE PROPOSAL WAS INTENDED TO KEEP DOWN FRENCH FOOD PRICES FOLLOWING DEVALUATION AND TO PREVENT BIG FARM SURPLUSES BUILDING UP IN THE COMMUNITY. BUT THE MINISTERS WERE TONIGHT STILL DEADLOCKED ON SOME ASPECTS OF THE COMMISSION'S PROPOSAL -- NOTABLY ITS DURATION -- AND CALLED A LATE-NIGHT SESSION TO WORK OUT THE DETAILS.