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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: Haim R. Branisteanu who wrote (1835)	11/5/2003 7:26:58 PM
From: Haim R. Branisteanu	Respond to of 110194

The strong upturn in U.S. growth has provided a temporary respite for the beleaguered U.S. dollar, but we continue to believe that the currency is still headed lower in the year ahead. However, over the short-term, the dollar may continue to find some modest support from the clear outperformance by the U.S. economy versus the rest of the G7. As well, the Bank of Japan continues to intervene heavily on behalf of the greenback, forestalling an even deeper drop in the currency. The clear upturn in the global economy, led by roaring demand in China, has lit a fire under commodity prices, with particularly large gains in metals. This move has been accentuated by the weakness in the U.S. dollar, notably in gold prices. Against this backdrop, the commodity currencies have continued to forge higher, posting some of the biggest gains against the greenback. The U.K. pound has also been particularly strong, with the Bank of England apparently on the cusp of hiking interest rates to chill a sizzling housing market. Widening interest rate differentials should provide underlying support for the pound going forward. While the Canadian dollar has lost some momentum in recent weeks, it appears poised for additional strength in the year ahead. The pluses for the currency include: an ongoing bear market in the U.S. dollar, rising resource prices, still-generous short-term spreads, a solid fiscal picture (even with a new-found deficit in Ontario), and a sturdy trade backdrop. The only major negative is the fact that Canadian GDP growth is now clearly trailing the robust U.S. performance. This is likely to cap the loonie's ascent, as will persistent rumblings from the Bank of Canada that they could cut rates if the economy flags, even briefly. Even so, we still look for the currency to break through the $1.30 level in the months ahead, with an even stronger move a distinct possibility. The heat on China to revalue has been toned down slightly in recent weeks, but we still look for just such a move around the middle of next year. November 2003 Currency Forecasts - Versus U.S. Dollar Actual 2003 2004 Oct. 31 Dec. Mar. Jun. Sep. Dec. CANADA 1.32 1.32 1.31 1.30 1.29 1.28 EUROPE Euro * 1.16 1.16 1.18 1.19 1.20 1.21 Denmark 6.42 6.42 6.30 6.25 6.20 6.15 Norway 7.11 7.05 7.00 6.95 6.85 6.80 Sweden 7.83 7.85 7.70 7.65 7.60 7.55 Switzerland 1.34 1.34 1.31 1.30 1.29 1.28 United Kingdom * 1.69 1.68 1.68 1.69 1.70 1.71 MIDDLE EAST/AFRICA Saudi Arabia 3.75 3.75 3.75 3.75 3.75 3.75 South Africa 6.89 6.90 6.85 6.80 6.90 7.00 ASIA China 8.28 8.28 8.28 8.28 7.50 7.50 Hong Kong 7.76 7.76 7.75 7.75 7.75 7.75 Indonesia 8496 8525 8550 8575 8600 8600 Japan 110 109 108 107 106 105 Korea 1183 1175 1150 1125 1120 1110 Malaysia 3.80 3.80 3.80 3.80 3.80 3.80 Philippines 55.40 55.50 55.00 55.00 55.50 56.00 Singapore 1.74 1.73 1.72 1.71 1.71 1.70 Taiwan 33.93 34.00 33.50 33.00 32.50 32.50 Thailand 40.0 40.0 40.0 39.5 39.5 39.0 SOUTH PACIFIC Australia * 0.708 0.705 0.710 0.715 0.715 0.720 New Zealand * 0.614 0.610 0.615 0.620 0.620 0.625 LATIN AMERICA Argentina 2.87 2.90 2.95 3.00 3.05 3.10 Brazil 2.87 2.90 3.00 3.10 3.15 3.20 Chile 627 625 630 650 660 670 Colombia 2876 2925 2950 3000 3025 3050 Mexico 11.02 11.00 11.00 11.10 11.25 11.25 Venezuela 1597 1600 1600 1600 1650 1650 * U.S. dollars per foreign currency Cross Rates VERSUS CANADIAN DOLLAR Euro (C$/Eur) 1.53 1.53 1.55 1.55 1.55 1.55 U.K. (C$/Pound) 2.23 2.22 2.20 2.20 2.19 2.19 Australia (C$/A$) 0.933 0.931 0.930 0.930 0.922 0.922 Japan (Yen/C$) 83 83 82 82 82 82 Mexico (Peso/C$) 8.36 8.33 8.40 8.54 8.72 8.79 VERSUS EURO U.K. (Pound/Euro) 0.68 0.69 0.70 0.70 0.71 0.71 Japan (Yen/Euro) 127 126 127 127 127 127