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Strategies & Market Trends : Currencies and the Global Capital Markets

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To: Frodo Baxter who wrote (1283)	2/17/1999 11:02:00 AM
From: Henry Volquardsen	Read Replies (2) of 3536

thank you very much Lawrence, I was driving myself nuts trying to remember who it was. As far as what yen price will be appropriate, it is a tough call. On fundamentals I believe the yen will have to go to somewhere between 130 and 160. However odd things some time happen in the currency markets and you get flow of funds impacts that can exert strong contrary forces. Remember the early 80s when the US started getting inflation under control and the investment environment started to improve dramatically. The flow of funds caused a massive flow of funds into the US propeling the dollar to 3.48 vs the dmark. This was way out of line with fundamentals and was actually harmful to the US. But the flow of funds was very powerful. If the Japanese investment environment starts to look inviting we could see a similar effect in Japan. Global investors are strongly underwieghted in Japan. If they all start to return to the market it could exert dramatic strengthening forces on the yen regardless of what the economic fundamentals call for. Henry

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