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To: Alex who wrote (14026)	7/1/1998 7:42:00 PM
From: goldsnow	Respond to of 116795

Top News Wed, 1 Jul 1998, 7:38pm EDT Dollar Gains Vs Mark On Speculation Russian Economy Woes Will Hurt Germany Dollar Rises vs Mark as Russia Woes Tarnish Germany (Update1) (Adds dollar forecast in 8th paragraph. Updates rates.) New York, July 1 (Bloomberg) -- The dollar rose to a 2 1/2- month high against the mark on speculation Russia's debt problems and tumbling stock market may steer investors away from Germany, the country's largest lender and trading partner. Traders sold marks today on concern Russian legislators may not pass laws needed to qualify for up to $15 billion in aid from the International Monetary Fund. A worsening of Russia's economic troubles could impede Germany's recovery from a seven-year slump. ''Germany has extremely heavy exposure to Russia'' in terms of trade, bank lending and investor sentiment, said Richard Segal, director of emerging markets research at Santander Investment Securities Inc. ''If Russia were to devalue the ruble a lot of people would get out of marks.'' The dollar climbed as high as 1.8203 marks, its strongest since April 14, and was at 1.8190 marks in late New York trading from 1.8075 yesterday. The U.S. currency fell a third day against the yen, to 138.02 yen from 138.77, after a Japanese government official said Prime Minister Ryutaro Hashimoto will propose an income tax cut. In Russia, Prime Minister Sergei Kiriyenko said the economic situation is ''grave'' and urged parliament to quickly approve tax law changes needed to secure the IMF loan. The financial aid would bolster central bank reserves and stave off a devaluation of the ruble. ''Because of the high exposure to Russia, the mark has to suffer when there's bad news,'' said Jonathan Coughtery, a currency strategist at MMS International in London. The dollar could rise as high as 1.85 marks in coming days, said Alfonso Alejo, senior proprietary trader at Sakura Bank Ltd. Many economists are concerned that if Russia's troubles worsen, they could spread to other parts of Eastern Europe, where much of Germany's exports and investment go. Russia's RTS stock index fell to a 25-month low today and the government failed in two debt auctions to raise enough funds to pay off maturing loans. The dollar barely budged after the U.S. Federal Reserve left its benchmark interest rate unchanged at 5.50 percent, as expected, amid scant evidence that inflation is gathering steam. Japan Tax Cut? The yen got a boost after a senior member of Japan's ruling Liberal Democratic Party's tax panel said Hashimoto will outline a tax cut plan when he visits the U.S. later this month. The official asked not to be named. ''A tax cut, if it's permanent, and a restructuring of the bank system would strengthen the yen and keep the dollar below 140,'' said Michael Kraner, a currency salesman at Asahi Bank. Hope for an income tax cut -- seen as vital to spurring domestic consumption and growth -- also touched off a rally in Japanese stocks, which rose to an almost three-month high. While Japanese officials have put in place tax rebates of 4 trillion yen this year and 2 trillion yen next year, many economists say they weren't adequate. The yen also got support from signs that Japan is redoubling efforts to tackle an estimated 77 trillion yen ($556 billion) in problem bank loans. The government will unveil a proposal tomorrow that would place banks under government control to continue lending to clients who might otherwise be cut off from funds. Dollar Rebound? The country's sluggish consumer demand and banking woes have made investors shun Japanese financial assets and prompted the Bank of Japan to keep the benchmark interest rate at a record low 0.5 percent since September 1995. Low rates make yen deposits and bonds less attractive to international investors. The dollar could soon resume its climb against the yen if Japan's bank bailout falls short or if the government's other attempts to end the recession disappoint investors. ''They need a total revamping of the financial system,'' said Cynthia Corrigan, who helps manage $2 billion in global bonds at Prudential Investments. ''Interest rates will need to stay low for years. It's going to be a long, expensive bailout. ''In the long term, the dollar goes up,'' she said. Elsewhere, sterling fell to $1.6600 from $1.6679 yesterday. The dollar rose to 6.0970 French francs from 6.0625 francs and to 1.5277 Swiss francs from 1.5203 francs. It also rose to 1791 Italian lire from 1782 lire. The dollar fell to 1.4621 Canadian dollars from 1.4950. bloomberg.com@@OjHFYgYAjs34GoXd/news2.cgi?T=news2_ft_topww.ht&s=543403582

To: Alex who wrote (14026)	7/1/1998 7:46:00 PM
From: goldsnow	Read Replies (1) \| Respond to of 116795

ANALYSIS-Russia confidence down-is $15 bln enough? 11:52 a.m. Jun 30, 1998 Eastern By Peter Henderson MOSCOW, June 30 (Reuters) - Everyone agrees Russia needs international help and signs are that it will get it soon, but analysts are divided on whether $10-$15 billion will be enough to weather the financial crisis. Russia needs funds to avoid cracking its budget, sending shock waves through a society already rent by strikes and protest. Markets have bounced wildly this year, so far always ending down with capital flight leaving central bank reserves rattling and the finance ministry with few buyers for its debt. Now markets, largely ignoring government battles with parliament to push through an anti-crisis programme, are focusing on a $10-$15 billion aid package under negotiation between Russia, the International Monetary Fund and others. ''Sentiment is based now almost entirely on the probability, the size and the timing of the IMF package,'' said Bill Browder, head of Hermitage Capital, a major equity fund. A crisis of confidence has hit the share market, which has lost almost two-thirds of its value this year, and the treasury bill market, where yields hover around 80 percent. The government's exposure to foreign capital flight is mostly based on the T-bill market. July may be torture for the finance ministry, which must redeem $6.5 billion in maturing issues on the five Wednesdays, when new auctions will be held. The ministry has cancelled some auctions recently when prices have not met its approval, an expensive option that eats up rouble and dollar reserves, dwindling despite a $670 million IMF loan tranche forwarded to Russia on Tuesday. ''I think they have until July 22 until the money runs out,'' said Eric Fine, Russia and East Europe debt strategist at Morgan Stanley in London. He based his assumption on Russia not getting or raising new funds abroad and investors rolling over half their maturing debt. The key to bringing the market back on track would be fresh interest in acquiring Russian paper, which would drive down yields and give the government breathing room. If investors rolled over proceeds from maturing debt into new issues, Russia could lengthen maturities, essentially bailing itself out of a crunch of short-term debt. Fine said the type of package Russia is touting would raise foreign reserves enough to easily cover commitments to foreign investors' holdings of treasury bills, about $16 billion at current market prices or about $22 billion at nominal value, and therefore would restore confidence. ''As of today I think $10-$15 (billion) does the job.'' Russia's nightmare would be if foreigners continued to flee, simply exiting as debt matured. That would leave Russia paying top dollar to foreigners repatriating profits that were expected to give the state room to make changes. Those changes must improve the lives of average Russians who go to the polls for parliament and president in 1999 and 2000, and many of whom are already protesting. Fine said a ''scorched earth'' scenario could see Russia facing a $44 billion external financing shortfall over the next year. Enormous financial and political pressure would come to bear on Russia, already successfully facing down rumours of impending rouble devaluation, just when it could least afford it. ''It is a grame of brinkmanship which may misfire,'' said Daiwa Securities senior economist Vlad Sobell in London. ''The sentiment is so negative that it really takes an awful lot of work to reverse it. That is why I am beginning to worry that even should the $15 billion be forthcoming...it will be an uphill struggle.'' He said the IMF had waited for too long to send the government funds -- the tools it needed to begin reviving the economy. He predicted a bright outcome, since Russia's short-term problem was not turning the economy but encouraging investors. ''This is purely psychological.'' ((Moscow Newsroom, +7095 941-8520 moscow.newsroom+reuters.com)) Copyright 1998 Reuters Limited.

To: Alex who wrote (14026)	7/1/1998 7:55:00 PM
From: goldsnow	Read Replies (1) \| Respond to of 116795

"Rebutting Mr. Duisenberg's insistence that the euro must not compete with the dollar as the world's leading reserve currency, Mr. Kohl said that it already is gaining credibility throughout the world as an alternative to the dollar." "A compromise was reached when French officials said that Mr. Duisenberg had agreed to step down halfway through his eight-year term in favor of a French successor. But since then, Mr. Duisenberg has balked at setting a firm date for his retirement" Do you sense perhaps a growing annoyance or power struggle behind the the happy facade (Euro mess is not going to be easy-can't see France agreeing to less than 20% Gold) Re-iterating Gold $350-380 by year-end :)