Word: franc
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...France produced fewer than 1.4 million cars, only half as many as West Germany. In steel, France turned out 19.5 million metric tons, compared with Britain's 27 million and Germany's 36 million. Germany exports about twice as much as France. The French may well run a trade deficit for 1966, and the franc has been weakening on world markets. Business is plagued by low profits, old plants, inadequate research, a shortage of capital and a faltering stock market...
With his own franc weakening on world markets, General de Gaulle has suspended his offensive against Fort Knox-for a while. He had been consistently chipping away at U.S. gold reserves by buying bullion with the dollars that France earns from trade and tourism. In October, for the first time since early 1965, the French failed to make their regular monthly conversion of $34 million into gold. Reason for the shift: rising imports of goods and outflows of capital are cutting into France's once hefty balance of payments surplus. The country has few dollars to spare...
...however, General de Gaulle's franc is looking a trifle weak on the world's markets. A hint of softness appeared in the last week of August, when the franc slipped from its normal 4.90 to the dollar to 4.91. Then it went down to a rate of 4.944 two weeks ago, and last week it drifted indecisively before closing...
...reason, as bankers figure it, is that short-term money in France earns 5% to 51% , less by as much as a percentage point than dollars have been earning on the Eurodollar market or in the U.S. Thus, French bankers have been turning in francs for dollars to invest at a higher rate of interest. These rates, plus heavy summer spending abroad by French tourists and a seasonal increase in French imports this fall, have created a "technical" weakness in the franc...
...situation of the franc is far from critical. Behind the franc stands a fat reserve of $5.9 billion, mostly in gold, which remains ample despite a mild decline in the last two months. France's balance of payments shows a healthy surplus. Last month an early debt repayment of $71 million was made to the U.S., and France has used surplus dollars to buy $358 million in gold from the U.S. in the first eight months of 1966. These are all clear signs of fundamental strength...