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To: Tommaso who wrote (207151)11/27/2002 9:56:16 PM
From: Haim R. Branisteanu  Read Replies (1) of 436258
 
Tommaso the logic behind the Swiss is quite simple. Until the early 90'thies there were two reasons to buy a currency - interest differentials, asset based country, low Budget deficit and positive trade balance.

The overriding of those was the "growth potential" of the currency financial markets - e.g. stock markets and high yield paper on performing corporate debt. Rubin got this message by knowing the works of financial markets and designed the strong USD policy - it worked because a rising USD kept inflation in check, the FED lowered interest rates, stock market went up as were high yield instruments and the hedonic & chain adjustment to inflation and GDP enabled reporting fantom above par growth and very low inflation in the US. So every one went into the USD.

Now recession hit people got out of the USD and searched for other currency between them aside from higher yield were commodity related currency CAD, AUD, NOK, NZD etc. and also the CHF -- the CHF has a lot to do with money not exactly clean due to their banking secrecy. As long as the stock market went up money left the CHF and was invested in the most recent hot thing.

Now this process should unwind if for example the EZ will start to recover and money will flow from CHF to the EUR Keep in mind that the Swiss have no natural resources like CAD, NOK or AUD nor do they have high interest rates like NZD, GBP so there is no incentive if things start to recover to buy CHF - no yield no natural resources just flow of criminal money, which in the case of Swiss is a very substantial amount from tax cheats around the world, Russian Mafia, Russian wealer dealers, white collar criminals, to dictators to drug money.

Stability will lower the CHF and USD and boost the JPY and EUR between the majors. The USD will be hampered by the mountain of debt and fiscal policy which will increase the budget deficit and dampen the stock market

BTW Deutsche Bank anticipated 1.06 to 1.08 USD to the EUR in the near future which equals to around 98 to 100 on the UDX which is now around at 106 - 107

BWDIK
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