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Strategies & Market Trends : Currencies and the Global Capital Markets

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To: Zeev Hed who wrote (2675)	12/26/2000 8:27:40 AM
From: Henry Volquardsen	of 3536

Zeev, my only real argument with your post is the implication, perhaps incorrectly drawn on my part, that there would be a sudden realization that the trade deficits are to large leading to a drastic decline in the dollar. My response would be that the free flowing nature of the currency market is such that the realization would not come suddenly but over an extended period and this would be factored in over time and not suddenly. This is more of a technical disagreement over how the market would function than a disagreement over possible cause and effect. As supporting evidence I would put forward the dramatic decline in short term volatility in the currency markets over the last 20 years. I first started in the business right after the collapse of the fixed exchange rate regime. At that time the intraday volatility was huge. Over the intervening two decades intraday volatility has greatly decreased as the markets have gotten very efficient at assimilating information and changes in trend. To me this argues against drastic moves and in favor of more subtle but longer term trends. Btw your near term forecast of the Euro retesting parity leaves it well short of its IPO. I agree that the implementation of the Euro was folly. On Japan I am decidedly pessimistic. There are no signs of a serious attempt to grapple structural issues. Also the demographic issues are snowballing ahead and very few people have paid much attention to the looming pension issue. Try as I might I can't see an exit for Japan that doesn't endure deep trouble. Henry

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