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To: Don S.Boller who wrote (22023)	10/20/1998 7:55:00 PM
From: goldsnow	Respond to of 116779

German banks see no medium-term dlr recovery 08:04 a.m. Oct 19, 1998 Eastern BONN, Oct 19 (Reuters) - The German Bank Federation (BdB) said on Monday it did not expect the dollar to recover much ground against the mark or the coming euro currency in the medium-term. Noting the new trend toward lower interest rates in the United States, the banks said with no interest rate cut expected in core Europe any time soon the dollar would lose its interest rate advantage against the euro. ''Meanwhile the dollar has been able to regain some ground, but nevertheless there is no sustained recovery of the American currency expected in the medium-term for the relationship between the dollar and the mark or the dollar and the euro,'' the banks said in their monthly report. The banking group, which represents Germany's leading commerical banks, said that the relative strength in economic growth between the U.S. and Europe would begin to shift in favour of Europe. While the U.S. is seen entering a period of cooling off in a late phase of the economic cycle, the 11 members that will launch monetary union, dubbed Euroland, are seen at a relatively early phase of the economic cycle, the banks said. In addition, the rising U.S. current account deficit would keep pressure on the dollar. The U.S. current account deficit is expected to rise to $240 billion, or 2.8 percent of GDP, while in Euroland a surplus of two percent of GDP is expected, the banks said. The banks also noted that the influence of the dollar on European foreign exchange parities was diminishing with the creation of Europe's single currency. While in the past any depreciation of the dollar caused European currencies to weaken against the German mark, this was no longer the case. ''For Germany this means that nearly 45 percent of goods can be exported without any exchange rate risk,'' the banks said. ''Against this background even a hypothetical fall in the dollar rates to historical lows would hit the German export economy less hard than was the case in 1995,'' they added. ((Bonn newsroom, 49-228-26097150, bonn.newsroom+reuters.com)) Copyright 1998 Reuters Limited.