European Stars and Stripes (Newspaper) - December 22, 1991, Darmstadt, Hesse                                Sunday december 22, 1991 the stars and stripes a Page 17money matters Dollar watch shown below Are the highest Dollar Exchange rates for the week of dec. 15-21 compared with Dollar rates for the same period one year and five years ago. British Pound one Pound would Cost you $1.82 $1.88 German Mark one Dollar would buy you 2.02 1.52 1991 1990 military Exchange rate 1986 Swiss franc one Dollar would buy you 1.39 1.31 1.70 j 1991 i 1990 198$ rate Cut to save billions for indebted americans a amps the Dollar fell sharply for the second straight session Friday battered by the Federal Reserve boards announcement of a full percentage Point Cut in the discount rate to 3.5 percent from 4.5 percent. Within minutes of the fed s announcement the beleaguered . Currency began plummeting sharply falling from a pre announcement level of 1.5563 German Marks to 1.5347. Analysts explained that the fed action aimed at dramatically stimulating the nearly comatose . Economy combined with thursday s half Point rate boost by the German Central Bank to sharply Widen an already unfavourable Dol Lar Mark interest rate differential. A when you have interest rate differentials widening 150 basis Points in two Day you have the makings of the Dollar getting pounded a said Francoise Soares Kemp currency specialist at credit suisse. Economists said that investors tend to favor putting funds into securities and other investments denominated in stronger currencies such As the Mark rather than relatively weaker ones such As the Dollar. The Market was also motivated in its Dollar Selling by the continued Overall weakness of the . A Economy Soares Kemp said. In late new York trading Friday the Dollar tumbled to 1.5335 German Marks from 1.5565 thursday and to 127.52 japanese yen from 128.20. The Dollar also backtracked against the British Pound Sterling which Rose to $1.8585 from $1.8365. Against other european currencies the Dollar retreated to 1.3625 Swiss francs against 1.3805, plunged to 5.2440 French francs from 5.3220 and to 1,166 italian lire from 1,180. In Milan the Dollar dropped to 1,178,40 italian lira from 1,188.70. The official rate for the Sale of British pounds to . Personnel for personal use will be $1.90 for a Pound through monday. The official rate for German Marks will be 1.52 through monday. United press International by the los Angeles times Friday s startling drop in interest Rales engineered by a deeply worried Federal Reserve will Ripple beneficially throughout the nation saving billions of dollars for people and companies weighed Down by debt. Many holders of Home equity Loans adjustable rate mortgages and a Range of business Loans stand to gain. Moreover lower Rales will mean direct Cash savings for people who buy Homes autos and other big ticket items financed by Bank Loans in the coming months. Yet analysts Are Uncertain about the future noting that today s Economy poses u bewildering Puzzle. A barrage of Layoff announcements has rattled consumer Confidence despite numerous cuts in interest tales since the country Sank into recession in july 1990. Moreover the retrenchment affecting retail financial services anti other industries in t Likely to Slop because of interest rate cuts. Quot whether this is sufficient Only time will Tell a said Robert it Dugger chief economist at the american Bankers association in Washington. Quot we re in economically uncharted  in Light of such questions Many economists prescribe new policy initiatives outside of the fed such As tax incentives that would spark new investment in Industry As a Way to further bolster the sagging Economy. By All accounts however if the lower rates Are to have a major effect it must happen in the beleaguered real estate and banking industries. One encouraging sign for the Indus what the rate Cut Means to you the Federal Reserve on Friday Cut its discount rate to 3.5 percent its lowest level since 1964. Here Are answers to key questions facing Consumers and investors after the move q what is the discount Rale a it is the interest rate that the Federal Reserve charges member Banks for Loans. It serves As a barometer for All sorts of interest rates since most Banks Price their Loans several notches above it. Q who is most affected by the Cut a the Impact is immediately fell by savers and investors. For example the moment the Federal Reserve slashed the discount rate the yield on Short term Treasury Bills plunged. Rates paid on certificates of Deposit Are loosely tied to How much the Treasury is paying on its Bills notes and Bonds. Q Whitt Are investors options a if you want to keep the risks minimal you might shift from Treasury Bonds to High Grade municipal or corporate Bonds. Some individuals might also consider stocks. Q mow does this affect those already investing in stocks and Bonds a generally speaking it is Good news. The value of old higher Rale Bonds is rising with every Cut in current rates. Corporate stocks also usually do belter in Low rate environments. Try 30-year fixed rate mortgages could drop to 8 percent by mid january from about 8.5 percent experts said. And the average adjustable rate mortgages could Start initially at Levels below 5 percent. At the same Lime real estate developers May enjoy Only limited Benefit in Banks stay wary about providing credit. In any Case a Large number of americans stand to reap Small windfalls As their adjustable Loans Are recalculated in the coming months. As Banks Learned of the fed s move to reduce the discount rate to 3.5 percent a an extraordinary one Point drop a they began reducing their prime lending Rales a a Benchmark for Many other Loans. Quot immediately tens of thousands of Small businesses will see a reduction in their financing costs a Dugger said. Ultimately lower interest rates could be a Blessing for the Economy. A a we re going to go into the rest of the 1990s with much reduced interest rates which Are setting the stage for aggressive business investment and housing recovery a said John o. Wilson chief economist at Bank of America in san Francisco. Yet lower interest rates also have a Downside. A growing portion of the Public now relies on interest income and such individuals including Many retirees May lose hundreds or thousands of dollars As rates continue to plunge. A when Consumers income tails so does their spending a said ail Steidl Diann of management horizons in Columbus Ohio. Market rallies when fed slashes rates new York up Wall Street got a Surprise pre Christmas gift from the fed and the Good Witch last week. The Stock Market started out the week on what looked like the awaited Christmas rally by extending the previous weeks winning Streak to a third session. But the rally stalled the next Day and the Market spent the rest of the week on a weak note until Friday when the Federal Reserve Board stunned everyone by slashing its discount rate a full percentage Point to 3.5 percent. The nation s major Banks responded to the feds first full Point rate Cut in a decade by lowering their prime lending rate a full percentage Point to 6.5 percent. The Market which had been expecting further easing of interest rates for weeks greeted the fed action by rallying at the opening Bell. The rate Cut came at a time when the Market was bracing itself for the so called triple witching hour a the expiration on the same Day of Stock Index futures Stock Index options and individual Stock options. The quarterly event usually oils the Stock Market and inflates trading volume. The witching hour helped spread the rally to the broader Market resulting in the heaviest trading Day of the year since 315.9 million shares traded on Jan. 17 a the Day .-led forces started bombing Iraq. For the week the Dow Jones Industrial average added 20.12 Points to close at 2,934.48 a its second weekly gain since the mid november debacle. Among broader Market indexes the new York Slock Exchange composite Index Rose 1.23 to end the week at 213.13, and the Standard amp poor a 500 Index added 2.57, to close at 387.04. Declining issues outpaced advances 1,044-989 among the 2,311 issues traded last week. Weekly big Board volume totalled 1,076,839,949 shares up from 966,174,554 traded a week earlier and 879,188,830 in the same week a year ago. Stocks closed with slim gains in moderate trading monday extending for a third session a rally fuelled by the markets Hopes for lower interest rates. The Dow edged up 4.69, to 29 9.05. Stocks closed broadly lower in Active trading tuesday after tax Selling profit taking and computer driven sell programs combined to snap the markets three Day winning Streak. The Dow gave Back 16.77, closing at 2902.28. On wednesday stocks closed narrowly mixed in Active trading managing to pare losses from an earlier sell off tied to fading Hopes for further interest Rale cuts and increasing prospects for More economic woes. The Dow edged up 5.81, to 2908.09, stocks closed narrowly mixed for the second Day in a Row thursday in Active trading again trimming losses from an earlier sell off fuelled by More discouraging economic news and weak overseas markets. The Dow added 6.27, to 2914.36. Fridays fed fuelled rally was fanned by the triple witching hour and the Dow jumper 20.12, to 2934.48 a its Best level in nearly three weeks. Market update activity for the week of december 16 20,1991 daily Dow Cloe 3100 3050 3000 2950 2900 2650 2800 2,934.48 highest close weeks High lowest close the 2,934 48 Fri. I 965 79-fn_ 2,902.28 tues. Week s Low 2,870 30 wed. Weeks change up 20.12 aps amps