European Stars And Stripes (Newspaper) - July 17, 1988, Darmstadt, Hesse                                Page 18 the stars and stripes sunday july 17,1988 experts predict continued Rise of Greenback the Dollar should continue its monthlong climb on foreign currency markets this week following Friday s Commerce department re port that the american Trade picture continued to  the Trade deficit Rose slightly in May to $10.9 billion the imbalance was still the Sec Ond smallest in almost three years and Marks the third consecutive month of Good news. Most economists and traders had been expect ing the slight widening in the deficit for May because april figures had been depressed by unusually Low import figures. By . Kominicki on the strength of the Trade data currency traders in England and West Germany expect the Dollar to jump another 2 percent this week. We re predicting a Range of Between 1.85and 1.90 Marks for the next three weeks or so an american banker in Frankfurt said. The Market is so bullish on the Dollar right now it would have taken a deficit of $13 billion just to keep the Dollar at current  most traders said they doubted the Centra Lbanks could intervene on a scale Large enough to significantly weaken the Greenback although everyone expected a concerted Dollar sell off when trading resumes  s going to take coordinated Selling from everybody and a lot of it one trader  s figures capped a hectic week in Finan Cial circles As the markets kept watch on a flurry of Trade data employment and consumer spend ing statistics and Central Bank action. The Dollar climbed tuesday on the word that Japan s Trade surplus had declined by 10 per cent and jumped again wednesday when fed eral Reserve chairman Alan Greenspan announced that the fed planned to Battle inflation by reining in the . Money Supply. That signalled More Good news for the Dollar in response to Greenspan s comments big american Banks hiked their prime lending rates a move that will make the Greenback More at Tractive to  Council meeting wednesday at the West Ger Man Bundesbank attended by Chancellor Hel Mut Kohl appeared to have Little effect on the  Market already knows the Bundesbank s position one trader said of the meeting. The plan to intervene to slow the Dollar s climb whenever they  the generally Bright Short term Progno Sis for the Dollar there remained continued speculation in some quarters that further improvement in . Trade ultimately will Hurt the  experts now believe the stronger Dollar will Hurt . Industry s efforts to increase production capacity since a stronger Buck eventually would make the goods produced less competitive on world  s an interesting theory but the lower Dollar has already done so much Good for Ameri can Industry that it could Rise to 2 Marks and absolutely nothing would be lost argued one German  traders also cautioned that the deficit in America s current account a combination of the Trade data plus the total flow of american currency to foreigners continues to expand. The Large Federal deficit guarantees that you have a Large flow of dollars to foreign investors one German Bank treasurer noted. The Trade deficit has declined by $20 billion since Las year but the current account has improved Only by about $5 billion. So until your Federal deficits brought under control there always will be some question about the american  in that Light All this new interest in the Dollar is a Little foolish he added. Black monday crash highlighted closeness of world s markets  staff writer Frankfurt West Germany the chairman of the new York Stock Exchange warmed up his mostly West German audience last week with a bit of High financial levity. Referring to oct. 19, the worst Day in the history of the world s Premier Exchange As a technical correction John Phelan related the Post crash Fate of some australian financiers. Members of the International federation of Stock exchanges had met in new York about a week before Black monday. The meetings of course were High class affairs culminating with a fete amid the splendor of the metropolitan museum of Art. Afterwards the group s australian representative left for two weeks in Italy touring Remote Hill country towns. The travellers came Back out and then Home before they discovered their markets were Down 40 something percent Phelan said. The High tech wizardry that bounces financial Dat about the world failed to reach vacationing aussies in Italy but Phelan maintains that Black monday verified the increasing global inter relation of markets. Relating his views on the future of Stock exchanges Phelan addressed about 500 business people who turned out wednesday in Frankfurt at a lecture sponsored by the Institute for capital Market research. The october crash saw the Dow Jones industrials plunge508.32 Points in one Day a decline of More than 22 percent. Then the electronic dominoes started falling As the badness spread knocking Down one Exchange after another. The catch phrase emerged when new York sneezes Theresa of the world catches the flu As the beast let Loose on Wall Street bludgeoned exchanges in London Frankfurt Sydney Australia and most viciously Hong Kong. Excluding Tokyo the rates of decline experienced byword exchanges were almost identical Phelan said. And i think that s the first time. That has Ever Hap  the trend toward globalization although slowed Byafter-oct9ber caution is a Given he said. The remain ing questions Center on lessons to be Learned from the crash especially the evolving role played by institutional investors and the limits that must be placed on the use of steadily increasing Levels of technological sophistication. The causes of oct. 19, Phelan said were excessive speculation by pension funds perhaps As few As 12 to 15 major players and excessive use of programmed or computerized trading. The problems compound each other. The largest investors turn portfolios Over to Money managers an desire a Good return plus insurance on the risks of computer stocks then place automatic sell or buy orders pegged to their performance. The system began a downward spiral oct. 19 that fed on  protect against another Black monday Phelan suggests first a reappraisal of programmed  most of the models operating along the same lines a Large investor using a program cannot profit much More than any other Large investor. A Good buy identified by one Model will be identified by All mod Els and because the models All react the same Way they hedge against profit As Well As loss. But beyond the common sense aspect for the traders the new York Stock Exchange must come to grips with Rule changes needed after october and in the face of More and More advanced computer trading capabilities. Rules have been instituted to halt trading for an hour if the downfalls 250 Points in a Day and halt trading for another hour if the Dow Falls a total of 400 Points. The markets will continue to have a love hate relationship with regulation desiring unencumbered Trad ing but recognizing a Market without Structure and some Basic rules is no Market at All Phelan said. The Downside of globalization is evident with a look Back to october. But exchanges in new York Frank Furt London Paris Tokyo and so on will become More interdependent Phelan said. And the upside of that global linkage will be increased Opportunity for bringing together those who have Money with those who need it. Stock Bond markets in America reaping benefits of stronger Dollar by Anise c. Wallace new York times investors in financial markets often develop obsessions with a single economic barometer to the seeming exclusion of All others. The most recent example is the Dollar. In the last few weeks the Dollar has risen sharply against the japanese yen and the West German Mark. And on the Days when the Dollar has been exceptionally Strong both the Stock and Bond markets in the United states have staged forceful rallies. As the Dollar has enjoyed this six month High therond Market has climbed briskly and the Dow Jones Industrial average has jumped. And traders and strategists say that if the Dollar continues to strengthen interest rates could decline sending Bonds and most stocks higher. Many on Wall Street have been surprised by the Dollar s recent strength. Strategists now say that this firming process could continue for six months to a year. I would t fight the trend said Peter Nadosy managing director of Morgan Stanley & co., who con ceded that he was caught off guard by the Dollar surge. Right now it s hard to say where it  while they May not agree on How High the Dollar Cango most strategists believe it is not Likely to drop again soon. The Dollar is not totally out of the Woods but Wedon t see much Downside risk said Charles i. Clough chief investment strategist at Merrill Lynch & co. These strategists believe the Dollar could Rise by 5percent or 10 percent in the next six months As currency traders and International investors drive the Dollar higher. Thus even if foreign Central Banks try to limit the Dollar s Rise a change in perception by Large investors might push the currency through the upward limits set by the Central Banks last Winter the strategists say. The Dollar has been firming for most of the year but there Are several reasons for its recent strength. Man investors Are convinced that the leaders of the major industrialized nations agreed at the recent Toronto economic conference to tolerate a higher Dollar. The improving . Trade deficit lower than expected inflation and relatively High interest rates also have helped. The High interest rates which have Bee caused by the Federal Reserve Board s tight monetary policy make Dollar denominated investments especially . Treasury Bonds attractive for foreigners. If the United states is very restrictive and every body is banging away to stimulate their economies the Exchange rate should go up said Peter j. Canelo an investment strategist at Bear Stearns & co. The firming Dollar should make the . Financial markets better performers in the next six months mar Ket watchers say. For one thing a stable Dollar attracts foreign investors. They do not have to fear losing an of their assets in the translation from the Dollar Back into their own currency. Many european and japanese investors had stayed away from Wall Street afraid of both the currency and the financial markets. In recent weeks they have begun to move Back in and help drive Bond prices higher dealers say. A stronger currency also Means the Federal Reserve will be under less pressure to defend the Dollar by keeping interest rates High. Fed officials can concen trate instead on the growth of the Economy. The investment that benefits most directly from stable Dollar is . Treasury Bonds. By investing in treasuries japanese and european buyers earn yield two to four percentage Points higher than on Bonds issued in their own countries. This higher return together with an increasing Confidence in the Dollar has attracted the foreign investors Back into Bonds an pushed prices upward. The Bond Market is the major beneficiary Nadosy of Morgan Stanley said