European Stars and Stripes (Newspaper) - December 31, 1989, Darmstadt, Hesse                                Page 18 the stars and stripes business news1989 was famine year for Dollar East bloc reforms May ring in year of the Mark by Randy Mcclain financial writer the Swift Pace of political Reform in Eastern Europe turned the final months of 1989 into a feast for the West German Mark and z famine for the declining . Dollar. European currency analysts expect the  year touring More reverses for the Dollar and perhaps even a record postwar Low versus the Mark. "1990 could Well be the year of the Mark said David Simmonds chief Treasury economist with mid land Bank in London. Simmonds predicts the Dollar will drop to at least 1.50 Marks during the first four months of 1990 and perhaps further. The Dollar has never traded below 1.56 Marks in the postwar world. A few Short months ago anyone talking about record Low for the Dollar would have been told to get their head examined. After beginning the year at 1.75 Marks the buc slowly built strength Between january and mid june. An improving . Trade picture and what appeared to a Strong consumer de Mand on the Domestic scene convinced invasion that the United states waste place where their Money would earn the Best return. The . Federal re serve kept a tight rein on interest rates through the the year in review first half of the year buying the Confidence of investors. Meanwhile interest rates in West Germany and Japan were on the Way up but they had t yet Rise enough to wipe out the advantage of dealing in dollars. For the most part the Dollar s surge was caused by investors buying Long term assets in the United states to lock in High interest rates said Simmonds. As interest ales fell later in the year the Dollar and the . Invest ments the Buck could buy became less  the High water Mark for the Dollar in West Ger Many came in mid june when it touched 2.03 Marks on International currency markets. The top military Exchange rate of the year was offered june 16. That Day 1 Dollar bought 2.01 Marks. It was the first time since dec. 19, 1986, that Hebuck had fetched As much As 2 Marks but the High was Short lived. On june 17, the Dollar plunged 3 pfennig and it never again reached the 2-Mark level. By late december the Dollar was trading at 1989lows against the Mark As Well As the dutch Guilder belgian franc French franc Spanish peseta and italian lira. See Chart things weren t nearly As bad versus the British Pound. To England the Dollar s Low water Mark came in Early january when . Service members had to pay$1.86 for one Pound. High interest rates in great Brit Ain proved to be a Strong Magnet for investors at the time and the Pound Rose accordingly. But by year end persistent Trade deficits in the United kingdom Ana raging inflation had worked hand in Glove to erode investors Faith and the Dollar gained ground. Last week one Pound was Selling for si.64 at Mili tary banking outlets in England. That represents an improvement of 11.8 percent for the Dollar Between january and december. The Only other american service members abroad who saw the Dollar increase dramatically in value Over the past year were those in Turkey Iceland and Japan. In Turkey the Dollar went from being Worth jus More than 1,800 lire in january to More than 2,300 lire in late december. In Iceland the Buck was worth45.58 Krona in january but last week it was Worth More than 60 Krona. Against the yen the Dollar started out the year at123.70 yen but it was Worth about 142 yen As the trading year came to an end. Next year Simmonds said he sees the Pound strengthening somewhat against the Buck for the first few months of 1990 and then falling Back. Early next year relatively High interest rates in eng land will again attract investors to the Pound he said especially in Light of the fact that interest rates in the United states arc poised for a further fall. Late in the year though British interest rates will beheaded Down themselves As inflation cools off in the United kingdom and that should bring the Pound and Dollar into better balance. Look for one Pound to Cost in the neighbourhood of $ 1.60 next december Simmonds said. Other economists said the world s Central Bank splayed a key role in keeping the Dollar in Check against the Mark and most other european currencies in the second half of 1989. The Central Banks intervened heavily in currency markets Over much of the year and particularly in late september when the Buck made a renewed assault on the two Mark level. The big Banks managed to beat the Dollar Back finally driving it to its year end lows. The Federal Reserve Bank also sold billions of Dol Lars Over the course of the year to keep the Dollar from Riding too High. The . Central Bank s Long term goals to make american exports cheaper abroad and thereby help reduce the nation s massive Trade deficit. If the Market wants to see a higher Dollar for the Tim being it will go up but Over the Long run the Central Banks will win said Gunter Teich a currency analyst with theban of Boston s office in Frankfurt West Germany. Declining interest rates in the United states an corresponding rate hikes in West Germany and other european countries also worked to the Dollar s disadvantage As 1989 progressed said Teich and Petra Ott an economist with Citibank in Frankfurt. Short term interest rates in West Germany and the United states Are closer together today than at anytime since 1980, Ott said. That Means there s less Rea son for foreign investors particularly West German investors to put their Money to work in the United states. And that Means there s less demand for dollars. The biggest Story of the year though has been re form in the East bloc. I think the East West situation has been the biggest development of the decade if not the last 50 years said Teich. Ott and Simmonds agree. The situation in the East bloc has Given a boost to the Mark Ott said. And i think it will continue to dominate currency markets in the next several  most people believe West Germany is particularly Well positioned to take advantage of  business opportunities in Eastern Europe As the Region flirts with capitalism and starts to build Market driven icon currency High Low British Pound t .__$i53_ $u6ssj  to military Exchange Rale t amount posted Ato Dollan needed to buy one by Tbs Pound. Source merchant National ban its Suan Avni comics. Ott basically concurs with that analysis with one caveat. She said currency dealers will keep dose Eye on the East bloc for signs of backsliding into communism or chaos. Problems along those lines could take away some of the Mark s  most serious threat to Mark strength could come from inside the soviet Union Ott added. If theper Stroika of or. Mikhail Gorbachev is endangered by economic problems in his country it could be negative Factor for Germany also she said. West Ger Many benefits disproportionately from the euphoria Over the East bloc s turn toward democracy and it will be Hurt by any negative developments behind the Iron curtain she  the year Ott sees the Dollar trading Between 1.70 and 1.90 Marks on average. She does t see Hebuck slipping to a record Low As Simmonds docs. Nei ther does Teich by the Way. The Bank of Boston expert sees the Dollar falling to roughly 1.60 Marks before rising to perhaps 1.85 Marks later in the year. Simmonds on the other hand Calls the Dollar a Funda mentally weak currency primarily because of the huge . Trade deficit he also sees the opening of Eastern Europe As one of the great transformations of history. Until the Berlin Wall came Down West German was an aging Economy without enough people to do productive work the London economist said. Now with thousands of emigrants from East Germany head ing West and reforms taking place throughout the East bloc huge investment possibilities Are being created. Given the current economic slowdown in the United states West Germany looks like the Best place for investors to be he , Simmonds does t see the Buck suffering a knockout punch in 1990. He predicts the Dollar will fall As Low As 1.45 Marks by Spring stabilize at midyear and rally at the end of the year As economic growth rekindles in the United states. Look for the Dollar to Trade Between 1.45 Marks and 1.80 Marks he said. Berlin Wall plays major role in . Commercials by Brian Lewis staff writer  York the Berlin Wall is playing a Star ring role in three to commercials in the United states As Madison Avenue moves to capitalize on the collapse of communism. Quintessence inc., american Telephone & Tele graph co. And Pepsi cola have filmed commercials at the Wall in recent weeks. You Don t realize the problems until you actually get there and Start dealing with the red tape said Victor Zast senior vice president for corporate marketing at quintessence a Chicago based cosmetics firm. Quintessence s advertising Agency Foote Cone and Belding actually set up a mock Wall in West Berlin to gel the scene exactly As they wanted it. But in the final commercial most shots depict the real Wall. The quintessence and which began running in mid december shows an East German Grandfather his arms full of Christmas gifts crossing into West Berlin to embrace his family. As he crosses the Border near the Brandenburg Gate a Teddy Bear Falls from his bag. An East German Border guard picks up the Bear and hands it to the Man As the message peace on Earth flashes on the screen. Keith Gould who works on the at to account for the . Ayer & son and Agency said the company s Wall commercial was a natural fit in a Campaign at to has been using for six months that links its message to world events. Other commercials in the Campaign were filmed on location in the aftermath of Hurricane Hugo in South Carolina and hours after the san Francisco Earth quake. One that aired last summer showed an Ameri can reporter in Paris to cover the French Bicentennial and phoning Home via at to products. Gould said his Agency interviewed 60 to 70 people in West Berlin and got some very moving stories for its Wall commercial. We were Able to share emotions across  the commercial features interviews with germans at the Wall and people in the United states telling How they Felt when they heard the news that the Border had been opened. The commercial makes its pitch for at to by stressing the need for communication which just happens to be at to s business. Gould said the Agency filmed Only on the Western Side of the Wall. We were More concerned with getting people. It really did t matter to us where they were standing he said. Odds Are the commercials won t run in Europe but Gould said his Agency is still discussing the possibility with at to. Pepsi cola is not talking about its Wall commercial which is scheduled to go on the air in the United states Erwn