UK Press: Ex-boe FX Head Says Bank Should Sell Stlg, Not Gold
Aug. 19-MAR--[B] UK Press: Ex-BOE FX head says bank should sell stlg, not gold By Bridge NewsLondon--Aug 19--The debate over whether the UK's monetary authoritiesshould allow sterling to rise unchecked was reignited today by Terry Smeeton, the former head of the Bank of England's foreign exchangedivision. UK Chancellor of the Exchequer Gordon Brown should order thebank to be a "ready seller" of sterling at levels above 95 on itstrade-weighted index, Smeeton said in a letter published in the FinancialTimes. * * *Sterling closed at 103.6 on its TWI Wednesday, so Smeeton clearlybelieves the currency should be forced down from its current levels.In his letter, Smeeton argued Brown should make use of the currentstrong fiscal position by allowing a funding requirement to arise through the sale of sterling. Selling sterling above 95 on the TWI "would have the effect of bringing the pound lower, thereby helping British industry. Thesales of sterling should be funded by the issuance of long gilts, therebyhelping maintain liquidity in the gilts market, an important objective fora leading financial center like London."Smeeton also argued that by selling sterling, and thus boostingforeign exchange reserves, the bank would not have to go through with itscontroversial gold sales."The...rise in foreign exchange reserves...would have the consequenceof reducing the proportion of gold held, destroying any case for goldsales and thereby helping the producing countries."In his few public comments on FX intervention, however, Brown hasconsistently opposed the idea and the bank has yet to intervene to push sterling lower under the current government. EndBridge News, Tel: +44-171-842-4079Send comments to Internet address: gennews@bridge.com
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