US Bloomberg Network Newsletter – December 4 1997

Bloomberg Network Newsletter

December 4, 1997

Dollar/Yen to Hit 145/160

HONG KONG, December 4 (Reuters) – The dollar yen might hit 145 – 160 next year, Princeton Economics International said in a report of the November issue.

The key pivot point for dollar yen to watch will be 126.68, the report said.

“A year-end closing above 126.68 for 1997 will signal that we could see 144.8 next year with the potential to rise to 152 or 160.13 during 1998” it said.

The Japanese yen is still under long-term selling pressure, Japan is very much in a similar position to that of the US during the Great Depression, it said.

“Once an annual closing above 144.8 takes place, our long-term forecast called for 240 – 278 by the year 2003 will be confirmed.”

The dollar marched higher against the Japanese yen to 129.33/38 in New York early trade from 128.76/81 at Wednesday’s New York close.

—HK Newsroom

Princeton Sees Hang Seng Long-Term Support at 5431

HONG KONG, December 4 (Reuters) – The blue chip Hang Seng Index will find its major long-term support at the 5431 area, Princeton Economics International said in a report of the December issue.

“As long as this level (5431 points) holds during 1998, then a recovery to new highs is still possible between 1998 – 2003,” it said.

A monthly closing beneath the 8095 level will warn that a test of the truly major long-term support at 6707 – 5431 becomes possible by June/July in the year 1998, the report said.

The Hang Seng Index is still poised for a 1998 low, it said.

“If 1997 manages to close below this area (10,070.8 level) at year end, there will be no question that the bearish correction will continue into year 1998.”

The blue-chip Hang Seng Index has plunged by around 30% from its year high in August. The Index closed up 267.36 points or 2.39% at 11474.94 points on Thursday.

The report also said, in the case of Hong Kong, the share market has served as the focal point given the fact that the real question is the underlying currency.

The report also said, in the case of Hong Kong, the share market has served as the focal point given the fact that the real question is the underlying currency.

The Hong Kong dollar peg eventually has to go as a result of competitive devaluation of regional currencies, Martin Armstrong of Princeton Economic International said in a news conference in Hong Kong on Wednesday.

But keeping the peg will result in asset deflation, he warned.

The risk of the Hong Kong dollar peg will increase, as the dollar/yen hit 145/60, he said.

The Hong Kong dollar was pegged at HK$7.8 per US dollar since 1983.

Armstrong correctly predicted the big increase in volatility in the world markets this year.

—Angi Li HK Newsroom

Gold to Find Support at $270 – 275 per Ounce

HONG KONG, December 4 (Reuters) – Gold will find support at $270/275 per ounce, Martin Armstrong, Chairman of Princeton Economics International said.

“It is very difficult to get gold into the boom market, as long as they (market players) viewed that all these central bank sales will suppress it any time,” he said.

Gold prices slipped further on Thursday to $289.85 per ounce at the London fixing, a fresh low since early/mid-March 1985.

“The big spikes in gold always come when the currencies are undermined,” he said.

The further the falls, the more the trend perpetuates itself but the stronger the rally would be after that, he said.

In late 1996, Princeton predicted gold would likely break support at $371.

Looking forward, Princeton predicted that gold would fall to a low of around $230 before rising to $875 before the year 2003.

—HK newsroom