Devaluation ahead?

18 September 1998

Devaluation ahead?

A WEAKENING £ is raising the possibility of a green rate devaluation, which would raise intervention prices.

For a 1% devaluation to occur, the £ has to trade at an average of DM2.84 during a 10-day reference period. This level equates to the -2% minimum gap between sterlings market value and the green £ rate needed to trigger a devaluation.

As FW went to press, the average gap for the current 10-day period was -1.9%, with just two days to go. "It looks like we have a 50-50 chance of a devaluation," said Gerald Mason.

If triggered, the devaluation would raise the intervention price by about 80p/t. It would also raise the sterling equivalent of pig export refunds, and increase beef intervention prices.

The weaker £, coupled with brisk spot trade, raised ex-farm grain prices through last weekend by about £2/t, to £69-£70/t. Further increases this week were hampered by the UK pricing itself out of the export market. &#42

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