European Stars and Stripes (Newspaper) - December 30, 1990, Darmstadt, Hesse                                Sunday december 30, 1990 f he stars and stripes. Page 13 business news 90 was record Low year for Buck by Randy Mcclain financial writer one year ago currency traders in Europe who had seen the fall of the Berlin Wall were predicting that 1990 would be the year of the German Mark. Unhappily for Penny pinching . Service members overseas that prediction proved right on target. Despite a slight Dollar rally in recent Days in which the Buck managed to climb Back above 1.50 Marks 1990 will go Down in history As a year of historic lows against the Mark and most other european currencies. The reason for the Bucko a tailspin is simple said Steve Barrow an International economist with chemical Bank in London. A the . Economy is weak and the German Economy is  while european headlines for much of the past year were filled with optimistic appraisals of new investment opportunities in the former East Germany and other emerging East bloc , the news in the United states turned gloomy. Unemployment was on the Rise reaching a three year High of 5,9 percent in november. Job growth slowed to a crawl manufacturing employment continued to shrink. And political pressure was brought to Bear on american Banks to Cut interest rates to fix the sagging Economy. Most economists now expect the United states to remain in a recession at least for the first half of 1991, and a few expect the weakness to persist 12 More months. Currency traders have taken notice of the sputtering economic signals steadily bidding the Dollar lower since january the top military Exchange rate for the year in Germany was set Long ago on Jan. 23, when one Dollar bought 1.69 Marks. Since then the Overall path for the Buck has been downward. The Low Point for the year against the Mark was reached dec. 11, when the military Exchange rate hit an All time Low of 1.43 Marks. The British Pound also gained against the Buck. One Pound was Worth $1,594 in mid March but seven months later the British currency was Worth nearly 40 cents More. Its High for 1990 came oct. 11 when one Pound sold for $1.9775 on the world Market. Friday afternoon one Pound was Selling in Europe for $1.898., Barrow and other european economists said the Bucko a poor Overall showing was due in Large part to the fact that interest rates Are falling in the United states while they re going up in Europe and the far East. Investors generally put their Money to work in countries and currencies that Promise the Best returns. One recent study by a new York City consulting firm drove Home the Point. It compared 90-Day Money map 1 Ket investments in the United states Japan arid str Many at the Start and the end of 1990. After adjusting for inflation in each country the study showed that such an investment in Japan currently nets the investor 1.2 More percentage Points than in the United states. America had been in the Lead by 1.4 percentage Points at the Start of the year. German Money Market investments began the year about tied with those in the United states but Germany now has the Lead by 23 percentage Points the study showed Ian Amstad economist with Chase investment Bank in London said he expects the interest rate spread to continue working to the United slates disadvantage a next year. Germany which is facing the enormous Cost of rebuilding its new Eastern states will probably have to move its interest rates higher in order to attract the foreign capital it needs to do the Job. And the Federal Reserve Bank May be forced to Cut rates by another notch or two in the United states to snap the Economy out of recession he said. Despite that negative trend however most currency traders say 1991 is Likely to end with the Dollar at least slightly higher than its current Levels. The Buck May slide to new lows in Europe before moving up again but the consensus is that the Dollar will end 1991 somewhere Between 1.55 Marks and 1.70 Marks in Germany and around st.80  with the British Pound. Here show three economists two from London and one in Frankfurt Germany see the year unfolding. Steve Barrow chemical Bank in London. Barrow sees the Bliar on a roller coaster ride in the year ahead. At the Start of 1991, the Buck will be supported by uncertainty in the persian Gulf arid in the soviet Union where president Mikhail Gorbachev is struggling to hold his nation together against a rising tide of ethnic unrest and disenchantment with his reforms. The Bottom line look for the Dollar to climb to 1.65 Marks in Germany during the first Quarter of 1991. In the second Quarter april Jun currency traders will again focus on the United states horrible economic performance Barrow believes and that should cause the Dollar to take a fall perhaps As Low As 1.40 Marks. In the second half of �?T91, the Buck should begin to recover a bit Barrow said because of two factors Hirst . Economic performance should begin to pick up in the second half of the year. And there will be mounting scepticism about the future of Eastern Germany he said. A initially we went through a sort of honeymoon period in East Germany Quot Barrow said. A even though the Economy was collapsing around their ears East germans seemed Well disposed to accept the hardship that was required in order for their country to be transformed. A but the further you get into unification the greater the risk that serious social problems will develop a he said. East germans might Start to wonder whether unification was worthwhile after All and the German Mark might lose some of its Luster amid the turmoil. A As a result the Buck should Rise above 1,60 Marks in Germany by the end of 1991, Barrow said. Against the British Pound the London economist sees much the same trend. One Pound will probably be Worth More. Than $2 six months from now but the Pound should fail Back to the $1.80 level by year end. Gunter Teich currency analyst with Bank of America in Frankfurt. Teich believes the Dollar will Trade be the graph Betow illustrates the dollars slide since june 1935. In the past 51/2 years the Buck has lost 51% of its value against the dog sch  your Dollar was Worth in 1990 in shown below Are High and Low Market Exchange rates in various countries High Low German Mark 1.69 1.43 British Pound 1.59 1.978 belgian franc 36.13 30.43 dutch Guilder 1.94 1.66 French franc 5.87 4.99 greek drachma 166.15 148.00 icelandic Krona 60.29 52.85 italian lira 1286.90 1109.00 japanese yen ,. 159.80 124.35 Spanish peseta 110,84 94,01 a turkish lira 2941.10 2307.64 military Exchange rate. Quot amounts listed Ore dollars needed to buy Ono British Pound. A amps Wos Boohoo tween 1.50 and 1.57 Marks in Germany Over a the first few weeks of the new year As traders remain cautious about War in the Middle East arid the soviet unions problems. If the situation in the Gulf is resolved quickly though currency traders might once a airy focus on weak . Economic fundamentals and drive the Dollar Down to 1.40 Marks he  later in the year Teich see a brighter picture for the Buck. By midyear the . Economy should be emerging from its doldrums and there should be no further need for interest rate cuts in the states he said. That will help move the Buck higher perhaps to 1.70 Marks by next december he said Ian Amistad economist with Chase investment Bank London. Amstad is the most pessimistic of the three analysts. He secs tie . Recession and lower interest rates in the states working against the Buck throughout 1991, by March Amstad said the Dollar will Likely Tumble to 1.45 Murks and then a scrape along the Bottoms for the next several months against the German Mark and other major european currencies a the Prospect of War in the Gulf could lend modest support to the Dollar Early in the year but even the outbreak of full scale hostilities wont bring on a big Dollar rally Amstad said. A while War persists there could be a flight to Quality but the upside potential is pretty Well limited a he said. In Amstady a View a .-iraqi War wont last that Long anyway. A a one week air strike followed by a two month ground Battle a he said by late next year look for a stronger . Economy to begin pushing the Dollar off its lows albeit slowly. A year from now Arnstad sees the Dollar at 1,55 Starks. Any further gains will have to wait untilt992, he said. In England he sees the Pound Quot flirting with the $2 level at midyear with the Dollar making slight gains later. He predicts one Pound will sell for $1.85 at year end 1991.bad year Mutual fund new York apr its evidently going to take More than one bad year in the financial markets to Dull investors voracious appetite for Mutual funds thanks to such events As the crisis in the persian Gulf and the Onset of an economic slump just about All types of Long term funds have turned in poor performances for 1990. Yet sales of new fund shares to investors show no sign of flagging setting their strongest Pace since the Heady Days of the 1980s Bull  the first in months of 1990, reports the investment company Institute the Industry a main Trade group sales of Long term funds have hit $125.2 billion. That puts them on the verge of surpassing the $125.7 billion total recorded for All of 1989. When full year figures come in they appear certain to rank As the third Best year Ever behind Only 1986 and 1987