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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: BGR who wrote (80613)	5/12/2000 11:50:00 AM
From: Freedom Fighter	Respond to of 132070

BGR, >>>And Japanese interest rates are lower, too! Why, then, please tell me, should raising interest rates help the Euro?<<< I don't know that they will. It's my view that currency movements involve a lot of interrelated factors. Some of them are fundamental in nature, like economic growth, real interest rates, saving levels, current account deficits or surpluses, inflation, net debtor or creditor position etc.... Some of them are speculative, like chasing momentum and guessing what central bankers are going to do etc.... I haven't seen much evidence that anyone can predict currencies on a short-term basis with any degree of consistency. I know I can't. My original point was only that the ECB and the Fed have been coordinating the rate increases since the tightening began. Since the ECB only raised a quarter I believe that increases the probability that the Fed will only raise a quarter too. If I knew what effect a 25bp or 50bp increase would have on the Euro I think that would make me a lot smarter than a lot of people that are running central banks around the world. However, I keep reading articles that suggest the ECB should raise rates to support the Euro. So I what I am venturing to say is that if the Fed raises 50bp it could have a negative effect on the Euro simply because lots of people think it will and I don't think 50bp is fully built in. Notice the original post I put "perceptions" in quotes. The only insight about currencies that I have is one that's very long term in nature. I think there is a lot of evidence that suggests that countries with chronic huge current account deficits and large debtor positions tend to have weak currencies over time. In general that makes me bearish on the USD. But I am thinking in terms of 20 years. If I had to park $10,000 at equal interest rates in Swiss Franks or the USD for 20 years I would take the Franks given the current situation. I might also take the Euro. (at equal rates)