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To: GST who wrote (71687)	8/4/1999 7:22:00 AM
From: Sam Sara	Read Replies (1) \| Respond to of 164684

>Nikkei down by midday amid worry over yen strength OK, I am missing something basic here about the response of stock markets to currency fluctuations. Consider the US market- as the dollar weakens, the US stock market should become "cheaper" for foreign investors, and that should lead to foreign capital inflows. Similarly, as the yen strengthens (and if people think that this is a long term trend), dollars should flow out of the Japanese stock market, as US investors see the value of their Japanese holdings drop due to the trend in currency rates. Now, what is confusing to me is that a strong yen should be good for the Nikkei- so, am I correct that these opposing forces i.e. even though strong yen is good for Nikkei, that US investors may pull out of Japanese stocks. Or is it even more complicated, with US investors perhaps staying in Japanese stocks, betting that Nikkei appreciation will be large enough to counterbalance whatever losses their portfolio of Japanese holdings will incur due to the strengthening of the yen against the dollar? And I thought convertible bonds were complicated!