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Strategies & Market Trends : Booms, Busts, and Recoveries -- Ignore unavailable to you. Want to Upgrade?

To: smolejv@gmx.net who wrote (9578)	9/17/2001 6:36:44 AM
From: elmatador	Respond to of 74559

Dollar's long bull run may be set to end By Christopher Swann, Currency Correspondent Published: September 16 2001 17:39 \| Last Updated: September 17 2001 02:32 Economists have long been wondering what would burst the dollar's bubble. Now they may have an answer. As currency trading begins again in earnest on Monday there are mounting expectations that the dollar's long bull run - which has taken it 37 per cent higher over the past five years - may finally go into reverse. Last week's terrorist attacks on the US threaten to bring about a step change in foreign exchange markets, in which an increased emphasis is placed on current account deficits. Once seen as the main determinant of currency movements, current account deficits have recently seemed less important. A surge of cross-border capital flows over the past few years has made it easy for countries to cover deficits by attracting investment from abroad rather than seeing their currencies fall. The US has been the most notable example of this. The yawning deficit, which has been running at around $30bn (£20.4bn) a month, means America has to attract more than $1bn of overseas funds a day. Funding this deficit has seemed easy over the past few years. A conviction that the US was undergoing a productivity miracle led by technological advances made US assets the obvious home for much internationally mobile capital. Increasingly, however, the availability of the capital is being called into question. A slowdown of the global economy - led by the US - had already began to undermined the cross-border flows. The risk now is that widespread political uncertainty will not only cause investors to rotate from risky to safe assets but also discourage investors from increasing their exposure in overseas markets. If this happens, the US would be starved of the funds needed to finance the current account, forcing the dollar lower. Rather than a gradual decline in the deficit, as consumers rein in spending and reduce demand for imports, a forced adjustment would be more abrupt and disruptive. There are already some worrying signs. Avinash Persaud, head of research at State Street, says that their risk appetite index - a broad-based measure of how adventurous investors are feeling - has already started to turn down. If this caution deepens, some economists argue, currencies would again be judged mainly according to their current account positions. This would be bad news mainly for the dollar but also for the pound. Britain's current account deficit is running at around 1.5-2 per cent of gross domestic product. Australia's current account deficit has fallen sharply recently, but remains around 2 per cent of GDP. The leading beneficiary would most likely be the Swiss franc. Switzerland boasts one of the world's largest current account surpluses - equivalent to more than 12 per cent of gross domestic product. The country's role as a hub for investments is important. An unwelcome boost could also be given to the yen, despite the increasing weakness of the Japanese economy. Japan's historic current account surplus has been shrinking in recent months as demand for its exports has fallen in the US and Asia. But in June its current account was still in surplus to the tune of Y771.2bn ($6.2bn). The eurozone's current account position is close to balance. A steep fall in the dollar, however, would clearly strengthen the euro. How far this develops is likely to depend partly on the scope and scale of the US retaliation, economists argue. The longer and more intense the conflict, the greater the risk of a disruption to global capital flows. A sharp drop in US equities when trading starts today would be seen as a sign that anxiety is already taking hold. For dollar bulls the best outcome would be moderation from equity traders. But even if there is no sell-off in US equities, rising international tensions seem almost certain to cast a dark cloud over the dollar in the coming months. COMMENTS: The Swiss Frank will become the currency anchor. Japan buying dollars to cheapen Yen. Eurocrats soon will intervene to keep Euro cheap to support exports. Those Swiss cows -now subsisized at tune of USD1000/per leg-will have an easier life even.

To: smolejv@gmx.net who wrote (9578)	9/17/2001 10:36:50 AM
From: LLCF	Read Replies (1) \| Respond to of 74559

<If this were the American way, I would never get to know CARE flour sacks and cheddar cheese tin cans as a kid. Believe me, they helped and I did not forget.> This doesn't mean they'rd be no intl aid and relief groups.... I'm talking about securing the home front... it would also get other western countries off their duffs, as we wouldn't be flying around taking care of everything, which, lets' face it, portions of populations in ALL countries, even Germany resent. DAK