Course Of Exchange. London, December 8, 1891

Time.

Prices Negotiated.

Meaning of Price.

From

To

Amsterdam........................

Short

12 1 5/8

12 2 3/8

Gilders and stivers for 1

,, .............

3 months

12 3 5/8

12 4 1/8

Rotterdam ..................

"

!2 3 5/8

12 4 1/8

Antwerp and Brussels .

"

25 45

25 50

Francs and cen-times for 1,

Paris.....................

Short

25 22 1/2

25 27 1/2

" ....................

3 months

25 37 1/2

25 45

Marseilles........................

"

25 38 3/4

25 45

Hamburg.......................

"

20 51

20 55

Reichsmarks and pfennige for 1.

Berlin...................

"

20 51

20 55

Leipsic......................

"

20 51

20 55

Frankfort on the Main....

"

20 51

20 55

Petersburg.......

"

22 11/16

22 13/16

Pence for 1 rouble.

Copenhagen...................

"

18 40

18 44

Kroners and ore for 1.

Stockholm....................

"

18 42

18 46

Christiana......................

"

18 42

18 46

Vienna.........................

"

11 92 1/2

11 97 1/2

Florins and kreut-zers for 1

Trieste............................

"

11 92 1/2

11 97 1/2

Zurich and Basle............

"

25 52 1/2

25 57 1/2

Francs and centimes for 1.

Madrid...........................

"

41 5/8

41 7/8

Pence for 1 peso.

Cadiz.......................

"

41 5/8

41 7/8

Seville.....................

"

41 5/8

41 7/8

Barcelona...................

"

41 5/8

41 7/8

Malaga.....................

"

41 5/8

41 7/8

Granada.......................

"

41 5/8

41 7/8

Santander.......................

"

41 5/8

41 7/8

Bilboa...................

"

41 5/8

41 7/8

Zaragoza......................

"

41 5/8

41 7/8

Genoa, Milan, Leghorn

"

26 12 1/2

26 17 1/2

Lire and centesimi for 1.

Venice.....................

"

26 12 1/2

26 17 1/2

Naples..................

"

26 12 1/2

26 17 1/2

Palermo and Messina ..

"

26 121/2

26 17 1/2

Lisbon...............

90 d. date

payable in legal currency.

Pence for 1 milreis.

Oporto...................

90 d. date

40 3/4

41

41

41 1/4

Calcutta....................

demand

14 9/16

14 11/16

Pence for 1 rupee.

Calcutta and Bombay..

30 d. sight docm'tpap.

14 1/2

New York :........

demand

493/8

49 5/8

Pence for 1 dollar.

(Clare, "The A B C of Foreign Exchanges," p. 40.)

It will be observed that exchange on New York, Petersburg, and Spanish, Portuguese, and Indian cities is expressed in pence per unit of these currencies, while all other quotations give the equivalence of a pound sterling in the money of the country quoted. For example, the New York rate on the date above mentioned was from 49 3/8 to 49! pence per dollar, while that of Paris was from 25.22 1/2 to 25.27 1/2 francs per pound sterling. As a result of this lack of uniformity discussions of the English exchanges are sometimes confusing, since a rise of the rate on one market will be expressed by lower figures and on another by higher. Thus, when discussing the New York exchanges 49 5/8 indicates a higher rate than 493/8, but in the case of Paris 25.27 1/2 is a lower rate than 25.22 1/2, since the higher figure in the former quotation indicates that it costs more pence to buy an American dollar, while the higher figure in the latter quotation means that a pound sterling will buy more French money.

This strange practice is the result of long established habit, and is an example of the tendency of the English people to cling to old customs even at the expense of convenience and simplicity.

B. The New York Exchanges. - Most of the transactions in international exchange occasioned by the foreign commerce of the entire United States and its commercial dependencies are made in New York City. As previously explained, this is due to the fact that it has commercial relations with every other part of the United States and is the centre of the banking system of the country.

Like most other exchange centres, New York draws more bills upon London than upon any other city. Not only is the commerce with the British Isles settled through such bills, but transactions between the United States and many other countries are settled by the same means. For example, if a New York merchant imports a cargo of currants from the Ionian Islands, his creditor will not draw directly upon him, but upon his London correspondent. Likewise, if a shipment of goods is made to a South American port by a New York merchant, he will probably receive his pay in the form of a London remittance. This condition of things is explained by the facts described in the preceding section.

One of the peculiarities of the New York exchanges is the regularity of certain seasonal fluctuations. On account of the fact that the exports of this country consist chiefly of agricultural products, bills of exchange on foreign markets, especially on London, are plentiful during the season when these crops are being exported. Consequently, from early autumn until about the first of January, the London rate of exchange is apt to be very low in New York, sometimes falling below the gold-importing point. During the remainder of the year the rates are generally higher, and during the spring months they not infrequently rise to the gold-exporting point. The regularity of these movements is often interfered with by the various influences which have been described in the preceding sections of this chapter, but, as a rule, they are observable, and, when not, the counteracting agencies can usually be discovered.

A second peculiarity of the New York exchanges is due to the treasury reserve, which may be drawn upon when gold is needed for exportation. In England and Germany every adverse movement of the precious metals directly affects the bank reserves and through them the foreign exchanges, since in those countries the presentation of bank-notes for redemption is the regular method of procedure when gold is needed, but in the United States the situation is different. The banks are allowed to keep any form of legal-tender money in their reserves, and hence may throw the burden of a demand for gold for foreign shipment entirely upon the treasury by holding on to their own supply, if they have any, and presenting greenbacks or Sherman notes for redemption. The result is that a demand for gold does not so directly affect the foreign rates in New York as in London or Berlin, since it does not necessarily diminish the aggregate reserves of the banks and through them the rates of discount. The situation in this particular has been somewhat changed since the passage of the act of 1900, which prevents the reissue of once redeemed notes except in exchange for gold. The effect of this is to actually diminish the bank reserves to the extent that notes are presented for redemption, since they do not find their way into circulation again and thus into the banks until an equivalent amount of gold has been withdrawn.

This peculiarity is not so important as it might seem at first sight, since ordinarily the banks respect the treasury reserve, and probably do not draw upon it with the same freedom as do the joint-stock and private banks of England upon the reserve of the Bank of England, but in times of pressure it offers to the banks a way of escape, and, as we have seen, involves the treasury in corresponding difficulties.

The method of quoting the New York exchanges is quite as peculiar and indefensible as that of the English. The London rate is expressed by indicating the number of dollars and cents required to purchase a pound sterling, the Paris rate by the equivalence of a dollar in francs, the Berlin rate by the number of dollars required to purchase four marks, and the Amsterdam rate by the price of a gulden or guilder in United States currency. The following table, copied from the Wall Street Journal for June 21, 1901, may serve as an illustration: -

Foreign Exchange. Actual Rates. (Compiled by Schumacher & Co.)

Cables.

Demand.

60 Days.

Sterling, open . . .

488 3/4-488 7/8

488 - 488 1/8

485 3/4

" closing ..

4885/8-488 3/4

487 7/8-488

485 5/8 - 485 3/4

Francs, open ....

515

515 5/8

517 1/2 . ,

" closing ...

less 1/16 515

less 1/16 - 1/16 1/4 515 5/8

less 1/16 - 1/18 1/8 517 1/2

Marks, open..............

less 1/16 95 3/4 - 13/16

less 1/16 95 5/8 - 11/16

less 1/16 95 1/8 - 95 3/16

" closing ....

95 3/4

95 5/8

95 1/8

Guilders, open . . .

40 1/2

40 1/2

" closing ..

40 1/2

40 1/2

Market opened steady.

Market weak and fully 1/82% lower.

Paris exchange on London 25 fr. 21 c.; adv. 1 c.