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Strategies & Market Trends : Waiting for the big Kahuna

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To: GROUND ZERO™ who wrote (5076)	9/9/1997 9:00:00 AM
From: Henry Volquardsen	of 94695

GZ, I am moderately bullish on the dollar for the balance of the year. With continued emphasis in Europe on getting their house in order for EMU there will be downward pressure on all the European currencies. The only thing holding this off at the moment is that the Bundesbank, as part of their rear guard battle against a weak EMU, is talking about raising rates and appealing to German public opinions love of a strong currency. Eventually the politicians will defeat the Bundesbank, unfortunately for the global economy, and we will see a wide weak EMU (referred to as WEMU). Under this scenario expect european currencies to be weak for sometime to come (think France 60s through mid 80s). There could be two significant European exceptions Sterling, if Blair has the wisdom to keep them out of EMU, could see bot significant economic strength and a stable currency. Swiss francs will be more problematic. The franc had strengthened viv a vis the rest of Europe and prompted a significant recession over the last few years. They are doing everything they can to restrain strength vs the mark. If the new Euro winds up a weak currency look for Switzerland to debase its currency in order to save its economy. Asia is more interesting. Over the near term I expect dollar strength in response to the continuing doldrums in Japan and the recent problems among the Tigers. The key for the yen will be the Nikei. Once the Japanese economy has started to recover enough to be reflected in a return to equities then the currency will return to the 100-110 level. Until that happens the only thing that prevents the dollar going to 140 is periodic jaw bonig by US officials trying to keep a lid on protectionists sentiments.

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