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To: PaulM who wrote (17913)	9/7/1998 1:32:00 AM
From: Alex	Respond to of 116766

Dollar falls to 131 yen level in midmorning deals ------------------------------------------------------------------------ The U.S. dollar continued to fall in morning deals Monday in Tokyo, hitting 131.83 yen at one point, the first break below 132 yen since May 6. Selling sentiment is steadily strengthening its pressure, dealers said.

To: PaulM who wrote (17913)	9/7/1998 3:25:00 PM
From: goldsnow	Respond to of 116766

Japan traders see $ slipping more on Fed,S America 04:30 a.m. Sep 07, 1998 Eastern By Kanta Watanabe TOKYO, Sept 7 (Reuters) - The dollar may be entering a medium-term downward trend as deepening troubles in emerging markets add to pressures on the U.S. Federal Reserve to cut interest rates, Tokyo dealers and analysts say. Turmoil in Latin American economies, due to their close links with the United States, could weigh on the dollar in the same way that the currency crisis in Asia has put pressure on the yen over the last several months, they said. Shigeo Ichioka, a strategist in the market trading department at Asahi Bank, said the dollar could enter a similar downtrend to that seen after the Mexican economic crisis began in late 1994. ''Mexico's financial sector may be heading into deeper troubles as Mexican borrowers' cost of servicing dollar-denominated loans has doubled due to the peso's fall,'' said Ichioka. The Mexican crisis of 1994 was followed by the dollar's fall to a record low of 1.3450 marks in March 1995 and a record low of 79.75 yen in April 1995. At the beginning of 1995, the dollar had stood around 1.5600 marks and 101 yen. Fears that Brazil might be forced to devalue its currency and trigger a competitive devaluation in the region sent Latin American stocks and currencies reeling on Friday. Brazil's central bank is estimated to have sold between $600 million and $1 billion on Friday to support the real, which ended flat at 1.1780 to the dollar on the day. The Mexican peso also fell sharply on Friday, with the benchmark 48-hour contract falling 7.7 centavos to a historic low of 10.2000/10.2170. ''The possibility of the Fed cutting interest rates to stave off the downward spiral in share prices worldwide is growing,'' said Ryohei Muramatsu, manager of treasury and foreign exchange at Commerzbank in Tokyo. ''(Fed Chairman Alan) Greenspan is showing a flexible stance, so the timing of easing may depend on the moves of the New York Dow.'' Greenspan said in a speech on Friday that the Fed now saw a balance of risks facing the U.S. economy, between deflationary pressures from international crises and domestic inflation. ''It is just not credible that the United States can remain an oasis of prosperity unaffected by a world that is experiencing greatly increased stress,'' Greenspan said. Expectations of a Fed easing are expected to invite more unwinding of dollar longs against the yen as the dollar would lose its lustre if the interest rate differential between Japan and the United States narrowed, dealers said. Friday's meeting in San Francisco between U.S. Treasury Secretary Robert Rubin and Japanese Finance Minister Kiichi Miyazawa provided the market with no fresh insights, they said. Active unwinding of yen short positions by U.S. hedge funds pushed the dollar down as low as 131.45 yen in Tokyo on Monday, compared with 133.51/61 yen in New York late on Friday. ''We may see more dollar selling against the yen by operators trying to cover losses incurred in emerging markets,'' said Yasuji Yamanaka, chief manager of the foreign exchange division at Nikko Trust and Banking Corp. The dollar's slide could also gain speed if more Japanese investors sell dollars for hedging purposes, dealers said. Eisuke Sakakibara, Japan's vice finance minister for international affairs, told reporters on Monday: ''I am very concerned that among Japanese investors, there are some people who do not fully recognise the risk of a yen rise.'' A dealer at a Japanese bank said: ''It may now be a good idea to take Sakakibara's advice more seriously.'' ((Tokyo Treasury Desk +81-3 3432 9780 tokyo.newsroom+reuters.com)) Copyright 1998 Reuters Limited

To: PaulM who wrote (17913)	9/7/1998 4:06:00 PM
From: goldsnow	Respond to of 116766

WORLD BONDS-No quick US rate cut for elated market 10:04 a.m. Sep 07, 1998 Eastern By Clelia Oziel LONDON, Sept 7 (Reuters) - Bond markets may be over optimistic in their expectation of an imminent U.S. rate cut even though Federal Reserve Chairman Alan Greenspan has opened the door to an easing, economists said on Monday. In a speech on Friday, Greenspan effectively shifted to a neutral monetary bias as he suggested the U.S. economy could not remain immune from the global crisis and inflation was no longer the primary threat, and this gave more reason to buy Treasuries. But the short end of the U.S. curve, currently pricing in a 25-basis point cut before the end of the year, may have to pare its recent sharp gains as a Fed move is likely to take longer to happen, analysts said. ''I think the market has run quite ahead of itself and I would be surprised if there was a rate cut before the end of the year,'' said Dick Howard, senior economist at Julius Baer Investments in London. A Fed cut could, however, be triggered sooner if Latin America was drawn into a full-blowm crisis, or if U.S. stocks fell by a further 10 to 15 percent, stirring up fears of a systemic crisis. Howard said the chance of a cut in the next Federal Open Market Committee meeting on September 29 was well below 50 percent. Other analysts also attached a small probability to a cut soon, except if U.S. consumer confidence started to sag and the U.S. inflation risk faded. The U.S. economy has been, in Greenspan's words, an ''oasis of prosperity'' as strong growth has shielded it from tremors caused by the emerging market crisis. But Greenspan said this could not be sustained. Calls for a U.S. rate cut have intensified in the past weeks, as this would ease the credit crunch in emerging economies and prop up tumbling stock markets. The Fed Funds rate, the main indicator of U.S. rates, is currently at 5.50 percent and was last reduced in January 1996. ''To me Greenspan's speech suggests that even if the Dow falls towards 7,000 they won't want to ease. What would be needed is much more evidence that we're going to get a slowdown in the U.S.,'' said Kirit Shah, chief strategist at Sanwa International. The Dow Jones Industrial Average closed at 7,640.25 on Friday. Shah said the two-year/30-year U.S. spread was too steep at 36 basis points and could flatten with the short end underperforming. Alistair Alexander, bond strategist at Bank of Montreal in London, said Greenspan's speech made the front of the U.S. curve look slightly less overvalued than it had been. ''For the front of the curve to maintain its current value requires quite an agressive rate outlook,'' he said. Still, it would be while before investor confidence could return to bond markets other than Treasuries and Bunds. The long end of Treasuries remains most analysts' favoured choice. Stephen Hannah, chief economist at IBJ International, said he was cutting the long-held 5.0 percent yield target for 10-year notes to 4.5. The yield closed at 5.01 percent on Friday, while the 30-year bond yielded 5.28 percent. The interest rate picture was similar in Europe, where the Bank of England's Monetary Policy Committee and the European Central Bank council will meet on Wednesday and Friday respectively. ''Our central view is that there is going to be no change in short rates within the G7, bar perhaps Canada and Italy,'' said Julius Baer's Howard. The BoE would not be in a hurry to cut rates unless there was concrete evidence that inflation is slowing down. But the front and the middle part of the gilt curve looked attractive, analysts said. ''If the Fed was to start easing to boost liquidity then I can see the BoE having to follow suit, but shy of that happening I don't see from a domestic ground the UK starting to ease until the second quarter of this year,'' said Alexander. Meanwhile, the ECB was expected to focus on the structure of its monetary policy rather than giving any guidance on rates. Bundesbank President Hans Tietmeyer has said that a rate cut in Germany remains unlikely. Shah said there could be some yield conversion in Europe market, with peripheral bonds making spread gains against Bunds, and also recommended getting out of Sweden into commodity-driven markets like Australia. In Germany, the 10/30-year spread could narrow to 70 basis points from 80 now. Alexander said his currency choice was the mark. ''I'd still be keeping a very short duration in core Europe. I don't mind missing out on certain amount of potential gains on the long end of the curve,'' he said. ((International Bonds Desk +44 171 542 8663, Fax +44 171 542 5285, uk.governmentbonds.news+reuters.com)) ++ To see the Treasury yield curve Reuters 2000 users can type USBMK- and hit the F3 key. Copyright 1998 Reuters Limited.