To: DB
" Low US interest rates mean low return on holding US currency. " Excuse my ignorance, but why? When one buys a currency, do they indirectly buy that nations loans? Intuitively, I'd think that the currency price would be more directly related to that nation's economic prospects and currency risk.
5 posted on
05/19/2003 4:31:15 AM PDT by
elfman2
To: elfman2
I'm no expert but I'd guess that when interest rates are low along with low markets returns investment money leaves the country in search of higher returns. Security with no returns isn't very attractive. People are willing to take some risks for higher returns. That is outside the US for now.
9 posted on
05/19/2003 5:09:05 AM PDT by
DB
(©)
To: elfman2
Intuitively, I'd think that the currency price would be more directly related to that nation's economic prospects and currency risk.
What it should reflect is the differance in each country's inflation. The inflation in Europe is higher so the Euro's value should go up. In the long run this is good for the U.S., as the dollar goes lower our exports get cheaper and theirs get expensive meaning more of our exports are sold and less imports are sold here.
To: elfman2
Intuitively, I'd think that the currency price would be more directly related to that nation's economic prospects and currency risk.
Exactly, we have a confidence standard!
15 posted on
05/19/2003 9:37:41 AM PDT by
ffusco
(Maecilius Fuscus, Governor of Longovicium , Manchester, England. 238-244 AD)
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