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what will happen if china makes a token revaluation of the yuan later this
year?
----- Original Message -----
From: "topos8" <topos8@xxxxxxx>
To: <realtraders@xxxxxxxxxxxxxxx>
Sent: Friday, January 09, 2004 12:10 PM
Subject: [RT] Fwd: US Dollar - Leonard Lloyd
> --- In gannsghost@xxxxxxxxxxxxxxx, "topos8" <topos8@xxxx> wrote:
> Leonard:
>
> As regards to the US dollar:
>
> Exchange rates are in the long run determined by the relative
> desirability of long term investments in the economies of the two
> countries involved. But in the short run (2 - 3 years), it is the
> real rate of return on money market type investments that must be
> compared.
>
> So, since 2001 the US fed has dropped short term rates to 1.00%, and
> during this time the European central bank and the Japanese central
> bank have been much less aggressive in lowering short rates (Japan
> because theirs were already very low). So the dollar started
> dropping and continues to drop because traders expect this relative
> differential in short term rates to persist. The US Federal Reserve
> feeds this expectation by insisting that it is not going to raise
> short term rates for the foreseeable future.
>
> So I expect the US dollar to bottom exactly when the Fed makes it
> clear that it is preparing to raise short term rates. My own guess
> is that the low will be in the 78-80 range in the US dollar index.
> The euro-currency will probably make it up to 132.
>
> At that point I think the pressure will be on the Fed to defend the
> dollar, and I also think that the stock market will be higher and the
> US economy will be showing strength. These factors will all come
> together to change Fed policy in the direction of fostering higher
> short term interest rate.
>
> A new dollar bull market will start and the euro-currency will begin
> a bear market. As the Fed moves towards tightening the long term
> bonds in the US will drop with the long bond getting into the 5.90 -
> 6.00% range and the futures dropping to 96-98.
>
> However, I expect the yield curve to flatten substantially once the
> long bond hits 6.00% so that during the subsequent bull market in
> bonds the long bond will rally much more than the shorter end of the
> market. This rally will reflect the market's final adjustment to
> very low US inflation rates.
>
> Carl
> --- End forwarded message ---
>
>
>
>
>
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