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Strategies & Market Trends : Currencies and the Global Capital Markets -- Ignore unavailable to you. Want to Upgrade?

To: Robert Douglas who wrote (906)	10/16/1998 9:51:00 AM
From: Gersh Avery	Respond to of 3536

Hi Robert, I believe that much of the stock market decline over the last few weeks has been the result of transfers of monies within 401ks from stocks to money market funds. Now that Mr. Greenspan seems to have declared war on shorts, those funds could quickly move back to where they were. In addition, while cash was on the move from stocks toward money market accounts, the overall inflows continued. Soooooo at this time there should be more net between the two than there was before stocks pulled back. If John Q. Public gets a case of buyers remorse about money market accounts ... Gersh

To: Robert Douglas who wrote (906)	10/20/1998 6:57:00 AM
From: N	Read Replies (1) \| Respond to of 3536

Robert and thread, Below, a Financial Times article with an inventory of potential affects on $ - short term unwinding $/yen - possible fiscal stimulus [again!] package in Japan in December - reluctance of Europe to lower rates - business cycle concerns in US - Lawrence's nice little monetisation foiled by a tacit agreement to let yen rise, $ fall Ideas? Thought? Complaints? Not responding to your post except to sort of mumble that we couldn't lower interest rates because labor market conditions were too tight...apparently the business cycle wasn't visible until banks arbitrage positions in bonds, greater than LTCM's posed a big problema...sort of like the 1970's when we couldn't raise interest rates because it would take too big of a whack out of gdp growth. NH [disenchanted with central bankers!...somewhat] Fatigue sets in after currency volatility By Richard Adams and Alan Beattie The international currency markets spent yesterday suffering from "battle fatigue", according to one foot soldier in London, after the turmoil of the last two weeks. The dollar remained sluggish during European trading hours. Against the yen it opened and closed weaker than at the end of trading on Friday. The dollar slipped down by ¥1.2, to consolidate at ¥114.65 in London. Over the course of trading the dollar was little changed against the D-Mark and sterling, with subdued activity seen in other markets. The events of earlier this month, when the dollar collapsed in dramatic fashion against the yen and the Federal Reserve made a surprise cut in interest rates, have left the market shell-shocked, according to an analyst at a Japanese bank. "The market has been marking time after the extreme volatility of the last two weeks," he said. "People are reassessing their books and their risk appetite." Market participants agreed that the volume of currencies being traded remained very light, and yesterday was said to be the quietest day's trading in London for over a fortnight. Ray Attrill, an analyst at 4Cast consultancy in London, said the market was governed by fear and concerns over illiquidity. "There is a gut feeling that the yen should go lower," Mr Attrill said, but it was tempered by worry that there was a risk that hedge funds would come into the market and "dump dollar-yen". There was news from Japan that the government is considering yet another economic stimulus plan, to include further fiscal measures, to be published in December. The reaction of the European central banks to the possibility of an international liquidity contraction still haunts some in the market, who worry that the European Central Bank will not cut interest rates fast enough to stop a credit crunch developing in Europe. Germany's six leading economic forecasting institutes yesterday predicted the euro-zone would have an official interest rate of 3.50 per cent, when the single currency is launched next year. They also expect that the euro will be stable against the dollar. -------------------------------------------------------------------------------- Avinash Persaud, currency strategist at J.P. Morgan speaking from New York, said that volumes in the market were thin, but that was nothing remarkable as investors continued to be "risk averse". "The key is when the appetite for risk returns," Mr Persaud said, which will cause the yen to fall. J.P. Morgan think that the dollar will eventually head back towards its previous highs around ¥140 when investors are prepared to sell yen. Japanese investors are particularly risk averse, after losing money on selling US Treasuries as the yen fell, Mr Persaud said. In the short term, the dollar-yen rate continues to be driven by the unwinding of short yen positions. The market may also become more pessimistic about the dollar's strength against the euro, because the Federal Reserve will continue to set monetary policy with regard to the health of the US financial system. -------------------------------------------------------------------------------- The Brazilian economy continued to leak dollars, in spite of earlier suggestions that the flood of dollars leaving the country was beginning to dwindle. Dealers in Sao Paulo said that between $300m to $400m left the economy through the foreign exchange markets yesterday. Brazil has now lost more than $30bn from its foreign exchange reserves since the start of August. Brazil recorded a trade deficit of $800m in September, but so far this month has recorded a surplus of $154m. -------------------------------------------------------------------------------- When Boris Yeltsin sneezes, the rouble catches a cold. The health of the Russian president dealt another blow to the sickly rouble after news that Mr Yeltsin cancelled a series of meetings. During morning trading in Moscow yesterday, the central bank allowed a fall in the official rate against the dollar, from Rbs15.5 to above Rbs17. Later the rouble weakened further, to about Rbs18, or 5 per cent below its level on Friday