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Strategies & Market Trends : Currencies and the Global Capital Markets

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To: see clearly now who wrote (3157)	11/17/2001 12:01:53 PM
From: Hawkmoon	Read Replies (2) of 3536

Hey Arnold.. It's probably time to kickstart this thread again because I believe the current oil price collapse is about to make the currency markets "interesting" again. The Fed has lowered interest rates to encourage economic stimulation based upon $20/barrel oil prices. Now that we're facing the prospect of oil going to the $10/barrel range, that will likely result in less demand for US dollars by the international community, as well as putting an end to Fed interest rate cuts. In fact, it's quite possible that the Fed may be forced to take back that .50 basis point cut they just gave us in order to more properly match the current surge in yields in US 10 year bonds (since the 30 year no longer is the standard). As yields rise, this should drain money from the overvalued equity markets. So the question is how the USD will respond to activity. And tangental to that is what steps the Bank of Japan will be forced to take should the USD decline in value, in order to prevent the Yen from increasing in value and damaging the current exchange rate upon which their export based economy is so dependent. Hawk

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