Sterling's Weakness The transfer of L350,000,000 of gold from the
Bank of England to the Exchange Equalisation Fund is striking evidence of the weakness of sterling and the extent to which the Fund has been exhausted in its efforts to defend the pound. Last July the dollar rate was 4.951 ; by the end of last week it had fallen to 4.634. The Bank's gold is undoubtedly being wisely used by being applied to the defence of sterling ; and the Fund's activities have been accompanied by a renewal of the unofficial embargo on speculative transactions in gold and foreign exchange. These weapons may, however, prove unsuccessful if, as is likely without some remarkable change in the European situation, the causes for the weakness of sterling continue to operate. The main causes are the return of French capital to Paris and the withdrawal of funds from London to New York owing to the instability of the inter- national situation, which, since Munich, has increased and not diminished. Indeed, the continued weakness of sterling is a very precise evaluation of the depreciation in international cordiality. If this lack of confidence continues, it may be necessary to take further steps in the direction of exchange control.
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