Foreign exchange: "short'-term factors play
a greater role.
Needless to say, the foreign exchange market
was overshadowed in 1985 by the events
surrounding the dollar. In particular, short-term
measures were seen to be governed increasingly
by factors other than those of a "fundamental"
nature, such as inflation and interest
differentials, and the balance of the current
account. Expectations concerning interest rates,
the economy and government policy also play a
significant part. Moreover, new products such as
futures are exerting a growing influence, with the
result that a large-scale build-up or dismantling
of positions in this market can give rise to major
fluctuations in rates on the spot market. The
considerable overvaluation of the dollar in
February 1985 was allied to this phenomenon.
There is thus reason for continued caution
towards this market, even more so in view of the
great uncertainty caused by the changes in the
policies of a number of central banks following
the agreement reached in September between
the finance ministers of the Group of Five.
The forward market has admittedly remained
constant in volume terms, but is has lost much
of its attraction owing to the worldwide
levelling-out of interest rates for interbank deals.
Against this background, we regard the
improvement in profits from foreign exchange
dealings, after the slight fall in 1984, as
satisfactory.
The same can be said of the efforts made in
recent years and supported by a policy
co-ordinated in Amsterdam, to streamline the
activities of the sixteen foreign and three
domestic branches which operate in this volatile,
high-risk market. Our task is greatly simplified
by the fact that these 19 branches are spread all
over the world, enabling us to operate in the
international exchange market 24 hours a day,
so that any branch can pass its open position at
the end of the day on to another branch for
closure.
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