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To: Keith J who wrote (5829)	1/7/1998 1:36:00 PM
From: Rational	Respond to of 27307

Of late, corporate profits have reduced trade deficit dramatically. But, that is expected to shrink due to competition/deflation. True, yen/US$ exchange rate is neutral as long as the US interest rate is increased. At this point, a rise in yen/US$ is a signal that the rate will be raised or be not cut as much as deflation could have dictated. My point is that corporate profits can further shrink as the rates are raised, both of which can increase budget deficit and US can be back to square one. Sankar << Now, the U.S. government deficit is near zero, and yet the current account deficit is still high. Until something changes, the U.S. is still the safe haven of the world and will continue to have a strong currency.>>

To: Keith J who wrote (5829)	1/7/1998 1:40:00 PM
From: santhosh mohan	Respond to of 27307

<<Even though the U.S. trade deficit is high, I don't think this will be much of an influence on exchange rates.>> U.S. exporters and the Big Three auto companies are sure to clamor for a weaker dollar. <<If interest rates are higher in the U.S. than Japan, it lends itself to the dollar becoming stronger against the yen.>> Perhaps Greenspan was laying the groundwork for lower rates by speaking about deflation on Saturday. <<For years, I kept hearing people say that the high U.S. government deficit was keeping the current account deficit high. Now, the U.S. government deficit is near zero, and yet the current account deficit is still high.>> True, the budget deficit appears to be under control, abstracting from recent calls by the politicos for lower taxes and greater govt. expenditure. But the national savings rate is not high enough. Household debt has increased tremendously. <<Until something changes, the U.S. is still the safe haven of the world and will continue to have a strong currency.>> Nothing is certain except death and taxes! SM