Newspaper article THE JOURNAL RECORD

Wall Street Could Benefit from Dollar's Strength

Newspaper article THE JOURNAL RECORD

Wall Street Could Benefit from Dollar's Strength

Article excerpt

A rally by the dollar in foreign-exchange markets has sent many Wall Street analysts back to their computer terminals to recalculate outlooks for the stock and bond markets.

After swooning for much of the past five years in the face of such muscular foreign currencies as the German mark and Japanese yen, the dollar has lately put on an impressive show of strength.

Late last week it was quoted at around 1.64 marks, up from a post-World War II low of about 1.44 in early February. Over the same span, it has risen from about 125 yen to about 138.

Most observers agree that the resurgence has been inspired by the overwhelming victory U.S.-led forces achieved in the Gulf War, and accompanying talk of a recovery from recession in this country.

But there is no such unanimity over what the rally means for stock and bond prices. Whenever they look at the behavior of the dollar in the currency markets, it seems, security analysts see a coin with two sides.

``In and of itself, appreciation of the dollar would be a negative for many United States companies because it worsens their competitive position in world markets,'' said market-watchers at Merrill Lynch & Co.

``But the circumstances that give rise to appeciation of the dolar - more favorable interest-rate and economic-growth differentials and a more favorable political climate - can benefit the United States.''

In particular, analysts note, the U.S. economy seems to have worked its way through most of the recession that began in 1990. At least the beginnings of recovery are widely forecast by mid-1991.

Germany and Japan, by contrast, are believed to be in the early stages of economic slowdowns.

``Investor confidence in the United States and the dollar has rebounded,'' said Wright Investors' Service, a Bridgeport, Conn. …

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