|
Hormats focuses on trade
|
 |
May 20, 1997: 12:52 p.m. ET
Strategist Hormats says U.S.-Japan trade imbalance is hurting dollar
|
NEW YORK (CNNfn) -- The precipitous fall of the dollar against the yen has raised concern not only in the U.S. bond markets but in the stock markets as well.
During Tuesday, in Tokyo, sales had stomped the dollar down to 111.98 yen, the lowest level since December, although comments from Japanese financial officials helped bring it back up to about 113 yen by mid-morning stateside.
The dollar's recent decline is the result of apprehension over the growing trade deficit between the United States and Japan, explained Robert Hormats, vice chairman of Goldman Sachs International.
"The market is beginning to focus on the huge U.S. trade imbalance and there is a view that as growth picks up in Japan and interest rates go up, a lot of the money coming from Japan to the U.S. will not come as rapidly into the U.S. securities markets," Hormats said on CNNfn's "Before Hours."
Figures released Monday showed that Japan's overall trade surplus grew 163.7 percent to 831.48 billion yen ($7.23 billion) in April.
Hormats said that while the weak dollar helps some American exporters "it makes U.S. securities, particularly American bonds, a little less attractive at the margin if you're buying into a currency that is depreciating."
The dollar also faces a twin threat from a possible interest rate hike by the U.S. Federal Reserve along with a move by the Bank of Japan to raise its country's rates, thereby closing the interest rate gap between the two countries.
Hormats said he was surprised at the extent of the dollar's fall.
"I thought the dollar could strengthen after the G7 meeting, but a combination of weaker numbers in the U.S. and somewhat more optimistic projections about growth in Japan and this big trade imbalance, have posed problems for it."
He added that the those factors will make the future not "look quite as good in favor of the dollar."
Elsewhere in the Asian business sector, Hormats looks for President Bill Clinton's one-year renewal of Most Favored Nation trading status for China to go through. It will come with a fight, however.
"There's going to be a lot of issues raised by various sides of the Congress -- the right, the left, human rights people --a whole panoply of issues will be raised."
Despite the bruising fight ahead, Hormats said it makes good economic sense for the President to take on the battle for MFN for China, even if it exacerbates allegations that the Chinese government helped fund Democratic activities.
"It boils down to (the fact that) American companies want to invest in China, sell to China, trade with China. Without MFN, that would be extremely difficult."
|
|
|
|
|
 |
|
