Chapter 212 US$5 billion!

"Currently since August, the federal funds rate in the United States has been maintained at 1%, which is the lowest point since 1958. Correspondingly, the exchange rate of the euro against the U.S. dollar has also increased from 1.0516 when we started shorting the U.S. dollar. As of today’s 1.1927, it has increased by more than 13%!”

When talking about these data to Barron, Daisy was still obviously a little excited.

In early July this year, Barron once told Daisy that he judged that the exchange rate of the euro against the US dollar was about to begin an upward trend.

At that time, the exchange rate of the euro against the U.S. dollar had just fallen from the highest point of the year (at that time) when 1 euro was exchanged for 1.1933 U.S. dollars in May, to 1.09...

The background is that from the end of July 2001, the exchange rate of the euro against the US dollar was only 0.8764. By May this year, it reached a high of 1.1933, an increase of 36%.

When DS Capital raised funds, used 1 billion pounds as a deposit, borrowed US dollars on a large scale, and began to convert them into euros, the exchange rate of the euro against the US dollar once fell to close to 1.05...

At that time, Daisy believed that after 1.09, the exchange rate of the euro against the US dollar would continue to fall below 1...

But the final facts proved that the euro was still strong and the exchange rate against the US dollar did not fall below 1. Instead, after DS Capital began to short the US dollar-to-euro exchange rate in July, the lowest exchange rate of the euro against the US dollar only reached around 1.05, and then after The United States continued to cut interest rates, and after the federal funds rate was lowered to 1%, the lowest point since 1958, the exchange rate of the euro against the US dollar began to counterattack.

As of today, the exchange rate of the euro against the US dollar has reached 1.1927, which is about to exceed the highest point of 1.1933 in May this year.

DS Capital used 20 times leverage this time and a margin of 1 billion pounds. Now, if the position is closed, there will be a profit of more than 5 billion US dollars!

If according to Barron's prediction, the exchange rate of the euro against the US dollar can reach 1.25 before the end of the year, then their profits will exceed US$7 billion!

This is why Daisy is so excited now. This is the most profitable investment made by DS Capital.

It is worth mentioning that at the beginning of July, the exchange rate of GBP/USD had reached above 1.6 and is still rising. This also allowed them to use 1 billion pounds as a margin to borrow US dollars to resist risks. Ability is constantly improving.

Barron's knows that by the end of this year, the exchange rate of the pound against the US dollar will reach a high of 1.7946, so in addition to their bullish view on the exchange rate of the euro against the US dollar this time, which is also bearish on the US dollar, including Mars Some funds, including funds, are also bullish on the pound-to-dollar trading pair...but neither the leverage nor the scale is large.

The main reason for all this, including the depreciation of the US dollar against currencies such as the euro and the pound, is that the current US government has begun to abandon their "strong dollar" policy.

The "strong dollar" was proposed by Rubin, the first Treasury Secretary of the Zipperton administration, in mid-1995.

This policy played an important role in the sustained rapid growth of the American economy in the late 1990s.

However, since then, although Texas Governor and Finance Minister Snow have also talked about the "strong dollar", they have repeatedly stated that the dollar price ratio should be determined by the "market."

After all, there are still many benefits to giving up the "strong dollar" policy at this time and causing the dollar to begin to depreciate -

First, the depreciation of the U.S. dollar can stimulate U.S. exports and accelerate economic recovery; second, it hopes to reduce deflationary pressure through the depreciation of the U.S. dollar; and third, it hopes to create an international trade and financial structure that is conducive to the United States.

But in the final analysis, the US dollar "has to depreciate", which is also the result of flaws in the American economy. The underlying reason is the annual trade deficit of US$500 billion.

In addition, the strength swap between the US dollar and the euro is inevitably related to the EU's "tacit approval".

European Commission officials have stated many times this year that the rise in the euro's exchange rate is generally beneficial to the economic development of the euro zone.

The European Central Bank also believes that the euro-dollar ratio is returning to a level "commensurate with the strength" of the two major economies.

This attitude led to Europe's "inaction" in adjusting the exchange rate, which contributed to the strength swap of the dollar and the euro.

The most direct result of the depreciation of the U.S. dollar is that the prices of American products have become lower and their competitiveness in the international market has been greatly enhanced, which is conducive to stimulating exports and driving overall economic recovery.

The appreciation of other major currencies has relatively weakened the competitiveness of other countries' products and reduced U.S. imports, which is obviously conducive to narrowing the trade deficit and current account deficit.

According to DS Capital's analysis from many published data, the U.S. current account deficit is likely to fall to less than $135 billion in the third quarter of this year from $139.39 billion in the second quarter, a decrease of approximately 3.1%.

Secondly, since the inflation rate in the United States is still at a low of nearly 40 years, the inflationary pressure caused by the depreciation of the US dollar is minimal, but it can eliminate the threat of deflation and be more conducive to "healthy" economic growth.

"The latest research report from Merrill Lynch estimates that the depreciation of the U.S. dollar to its current level may contribute as much as 2 percentage points to the U.S. economic growth rate."

Daisy said to Barron:

"However, it can also be seen that abandoning the strong dollar policy will bring many risks to the U.S. economy. The biggest risk is that excessive decline in the U.S. dollar exchange rate will cause the flow of foreign capital into the United States to slow down or even reverse. Then support the 1990s One of the driving forces behind the rapid growth of the American economy in the mid-to-late 2000s will be lost, which is extremely detrimental to the long-term growth of the American economy. Judging from the current situation, there are already signs of more capital being transferred to Europe. This is probably the reason why the European Union has allowed the euro to vis-à-vis the U.S. dollar. reasons for the appreciation.”

"Haha, can't those idiots in the EU see that the appreciation of the euro is not a good thing for Europe? Even if more capital flows into Europe in the short term, the question is, can it keep them?"

Barron shook his head and said:

"The Eurozone economy has always relied heavily on the driving effect of exports. In recent years, exports have accounted for more than 20% of the total economy. The appreciation of the euro has raised the prices of export products, reduced international competitiveness, and caused exports to have a negative impact on economic growth. The contribution rate of the economy has been greatly reduced; and the strengthening of the euro has caused cheaper foreign products to flood into the regional market, increasing pressure on the trade balance; finally, many large European companies have experienced a sharp decline in their earnings from the United States and other regions after converting them into euros, which has affected Its future investments. In the final analysis, these are not worth the losses, but now that Europe is weaker than the United States, it still has to accept their request for the appreciation of the euro..."

After all, this is somewhat similar to Japan's "Plaza Agreement" to a certain extent, but the final magnitude is not as large as the original Japanese yen.

Barron's companies, as early as July, had begun converting their U.S. dollar assets into British pounds as much as possible in order to avoid suffering too much losses in the depreciation of the U.S. dollar.

Other European companies may not have the early expectations of DS Capital, especially those European companies investing in the American market, which will definitely suffer losses due to the depreciation of the US dollar.

Unless they are willing to hold onto their dollars for a few more years until the euro begins to depreciate relative to the dollar.

"Have you seen this information?"

Barron took out a piece of information and handed it to Daisy and said:

"According to estimates by the French Economic Situation Observation Association, for every 10% decline in the dollar's value against the euro, the euro zone's GDP will fall by 0.8% in the first year and 0.16% in the second and third years. There are also A previous Merrill Lynch research report also believed that the appreciation of the euro has offset the effect of the European Central Bank's interest rate cut, and is expected to cause a 1 percentage point loss to economic growth."

Now, those European companies with U.S. dollar income have begun to engage in hedging futures trading to prevent further depreciation of the U.S. dollar from affecting their euro income. Their actions, to a certain extent, have also put the U.S. dollar under new depreciation pressure.

However, for Barron, because he had anticipated this in advance, the impact would not be too great. Moreover, through this investment, he would be able to "eat enough" at once, so he was quite relaxed in his speech.

"By the way, Daisy, help me collect information about the Selfridges Group, especially the shareholding ratio of the other shareholders, as well as information about the Selfridges family."

"Selfridges? It seems that their stocks have risen a bit recently because the Weston family intends to acquire them. This rumor has been spreading since July. Now the Weston family seems to have acquired a part of the shares of the Selfridges group in the secondary market. However, the specific share needs to be investigated.”