The ERM Crisis: Speculation: Soros moves in on the franc

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The Independent Online
GEORGE SOROS, the billionaire financier who 'broke the pound' on Black Wednesday, looked as if he would do the same for the franc and what else is left of the European Monetary System yesterday when he issued a dramatic statement reversing his earlier commitment not to speculate against the French currency.

Mr Soros is now seen by many as an all-powerful guru who can make self-fulfilling prophecies. In recent months his carefully calculated interventions have materially influenced the British property market and the price of gold. His statement to a press agency yesterday had a significant impact on sentiment in the global money markets.

There were others, however, particularly in the French government, who were praying that this time Mr Soros had lost his Midas touch.

He faxed a statement from his New York base to the London offices of Reuters saying that as the Bundesbank was not prepared to defend the system he felt free to speculate as he pleased, and added that trying to protect the EMS was now futile.

The statement went back on a commitment he made on Monday when he told the French daily Le Figaro that he was not speculating against the franc because he did not want to be accused of destroying the EMS.

'After the decision of the Bundesbank not to lower the discount rate, I feel no longer bound by the declaration I made in Le Figaro on 26 July,' he said.

'It is futile to attempt to protect the EMS by abstaining from trading in currencies when the anchor of the system, the Bundesbank, acts without regard to the interests of other members.

'I continue to believe that the European Community needs some kind of currency system and I hope that the ERM will be reconstituted along the lines outlined in my article in Le Figaro. I feel free to resume trading in the French franc after making this announcement.'

Hungarian-born Mr Soros, 62, now living in New York, used his dollars 5bn Quantum Fund investment vehicle to bet against the pound staying in the ERM last September and made an estimated dollars 2bn in the process.

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