Word: floats
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...solution, as predicted, was a monetary "float"-a relatively free market in which currency prices are determined by supply and demand. But instead of precipitating a complete free-for-all, the six partners agreed on a joint float, in which their own currencies will remain fixed in value against each other while fluctuating in unison against outside money like the U.S. dollar or Japanese yen. Several nations had to compromise individual policies to make that solution possible. Most notably, West Germany increased the value of the mark 3%. That move, which will make German exports a bit more expensive...
Ante Up. Since their currencies are already floating individually, Britain and Italy decided not to join; Ireland followed Britain because of the two nations' close trade ties. But after their currencies sink slightly lower, London, Dublin and Rome may decide to join their Common Market allies. Meanwhile, Sweden and Norway asked to be included in the joint float, even though they are not EEC members...
...Floating partly strips speculators of their advantage. "It's much more a onesided gamble if a government alone is pegging the dollars," says a monetary official in Canada, where local currency has floated against the U.S. dollar for nearly three years without major problems. "Under a float, a speculator has to gamble against other speculators. This helps settle the value of the dollar at a point somewhere near what rival speculators feel is about the right price." Besides, businessmen in recent years have learned to deal much more easily on the "forward exchange market" -where buyers and sellers...
...effective way for a nation to dampen currency speculation is to "float" its currency, allowing supply and demand to determine its price in terms of other money. But though they were in the eye of the hurricane last week, West German officials were strongly opposed to taking that step on their own, since it would change the mark's value not only in dollars but also in French francs, Dutch guilders and British pounds. Instead, the Germans favored a combined float of all nine Common Market currencies. The currencies would be kept on a fixed parity with each other...
...idea obviously was high on the agenda of the Brussels conference. But the mechanics of arranging a joint float are formidably complex. The pound and Italian lira are already floating individually and would have to be repegged against neighboring currencies before the whole structure could be set adrift against the dollar. Then, in order to keep all the floaters moving in the same direction at the same speed, the Common Market countries would have to promise if necessary to buy each others' currencies in almost unlimited amounts. Nor could anyone be entirely happy with a joint float even...