Page Two

THE MICHIGAN DAILY

Saturday, June 24, 1972

Page Two THE MICHIGAN DAILY Saturday, June 24, 1972

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British decide to float pound;
monetary crisis imminent

(Continued from Page 1)
pound will eventually settle
near the old parity of $2.60 and
avoid a formal devaluation.
Economists agreed that the
effect of the British float on the
American balance of payments
would be small. As the pound's
value changes, it will make
0 o
thrI
Clasied

American imports into Britain
cost more and therefore will re-
duce American sales there.
The greater the change, the
greater the effect on trade, but
pounds were selling for $2.51
yesterday, down from $2.60 the
previous day. This reduction of
3.5 per cent was not enough to
have any effect on trade. In any
event, the British take only 6
per cent of U.S. exports.
Although the float announce-
ment took the immediate pres-
sure off the pound, it left the
weakening U.S. dollar exposed.
International companies, bank-
ers, and speculators with large
funds began switching out of
dollars to find safer havens in
tronger currencies like Swiss
francs or German marks.
The dollar then sank to its
floor on continental money
markets which had opened for
business as usual. Central baiks
in West Germany, France, Bel-

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gium, Holland and other coun-
tries were forced to intervene
with support buying for the dol-
lar.
Informed sources said the
West German and French cen-
tral banks together bought over
$5 billion. Faced with the pros-
pect of buying more unwanted
dollars, these markets closed
down too.
Markets temporarily suspend-
ing foreign exchange dealings
included those in the six na-
tions of the European Common
Market and others as far away
as Rhodesia, Malaysia and Sing-
apore.
The New York foreign ex-
change market stayed open and
the pound quickly dropped five
American cents to $2.52. The
falling pound gave American
tourists a break in Britain
where they got more British
money for their dollars. Ameri-
can Express said there were no
restrictions on changing dollar
travelers checks. But British
tourists abroad got less foreign
money for their pounds.
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