When the European money markets opened on Monday (15 March), the European Joint Currency Float (known as "the Snake"), which was reduced to seven members over the weekend by the French decision to withdraw the france from the float, was the target of renewed speculation.
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Background: When the European money markets opened on Monday (15 March), the European Joint Currency Float (known as "the Snake"), which was reduced to seven members over the weekend by the French decision to withdraw the france from the float, was the target of renewed speculation.
With the franc floating freely outside the system of linked currencies the two remaining weak members - the Belgian france and the Danish crown - came under more concentrated attack. The French france had been forced out of " the Snake" by an intolerable drain on French currency reserves, and it ended the day with an effective devaluation in London of three per cent against the other leading currencies.
In Frankfurt, West Germany, the Deutschmark strengthened as speculative buying built up. The Bundesbank was reported to have bought heavily into Belgian frances and Danish crowns in support of those currencies.
As the currency markets were being thrown into turmoil by the French decision, several Common Market (European Economic Community) finance ministers were meeting in Brussels for a routine session of the EEC Council of Ministers. Some ministers made statements re-affirming their commitments to the joint float and present exchange rate relationships.
West Germany's Finance Minister, Hans Apel, said the "Snake" would continue in its present form. But he told a news conference that he had arrived in Brussels with authority to negotiate a minor upward adjustment of the mark as part of a re-alignment of joint float currencies.
But other participants at the meeting later reported that when a re-alignment of currencies and a widening of "Snake" margins was proposed by France's Jean-Pierre Fourcade, there was little support from the Benelux countries or Denmark. M. Fourcade then said, according to the participants, that he preferred to float the france rather than continue the debate.
SYNOPSIS: The currency exchange in Frankfurt, West Germany, was just one of the European money markets thrown into turmoil when they opened on Monday, following the French decision to float the france outside the European "Snake". The so-called "Snake" is the system of linked European currencies which are allowed to float only between strictly defined limits. The france had been forced out by intolerable pressures on French reserves.
In Frankfurt, the West German currency, the Deutschmark, strengthened as speculative buying built up. The Bundesbank was reported to have bought heavily into Belgian francs and Danish crowns to support both currencies - the weakest in the "Snake".
As the currency markets continued their hectic business, Common Market finance ministers were meeting in Brussels. Several of them issued statement re-affirming their commitment to the joint float and the present exchange rate relationships.
On the Bourse Exchange in Paris, the announcement of the French decision also brought hectic dealing. Participants at the Brussels finance ministers meeting said that France's Jean-Pierre Fourcade had proposed a re-alignment of currencies and a widening of "Snake" margins. But the suggestion appears to have received little support from the Benelux countries or Denmark.
During the day the Belgian france and the Danish crown came under heavy pressure. The French france had suffered an effective devaluation of three per cent when the money markets closed.