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Strategies & Market Trends : Asia Forum -- Ignore unavailable to you. Want to Upgrade?

To: MikeM54321 who wrote (6149)	9/3/1998 8:44:00 PM
From: MikeM54321	Read Replies (2) \| Respond to of 9980

Thread, Now I would like to follow up the previous article with something I read in Business Week(excerpts only) a few weeks back and have been meaning to post. Any comments/opinions appreciated. MikeM(From Florida) ____________________________________ The Dollar's Coming U-Turn With the current-account deficit starting to balloon, it's bound to happen When the pall from the Asian crisis eventually lifts, currency traders are going to take a hard look at the damage Asia has done to the U.S. trade deficit. When they do, they will very likely come to the same market-jarring conclusion: "Sell the dollar!" The resulting flight to another currency - such as the new Euro - could crimp stock prices, lift interest rates, and push up inflation. The dollar's U-turn will happen. Why? Because the current-account deficit-a kind of cash-flow statement of the U.S. international business that includes trade in goods and services, net investment income, and foreign transfers - is ballooning. This deficit totaled a record $47.2 billion in the first quarter. At an annual rate, that was 2.3% of gross domestic product, and the second-quarter gap is on track to hit 2.5%. As a percentage of GDP, the current-account deficit is already the largest of the Group of Eight industrialized nations, and it is headed toward 3%. That is typically the level at which the currency markets begin to speculate about a country's ability to continue to finance its international obligations at an existing exchange rate. Put simply, as a country's debts mount, its currency starts to look too lofty.