Yield differentials between foreign currencies

<body><table border="0" cellpadding="0" cellspacing="0" width="100%"><tr><td> <font face="garamond, times new roman, times" mstheme> <p> Yield Differential </p> <p> </p> </font mstheme> </td></tr></table><table border="0" cellpadding="0" cellspacing="0" width="100%"><tr><td valign="top" width="1%"><font face="garamond, times new roman, times" mstheme> <p> </p> </font mstheme></td><td valign="top" width="24"></td><td valign="top"> <p>This page uses frames, but your browser doesn't support them. </p> <p><strong><font face="Arial Narrow" size="2" color="#C0C0C0">Forex: Yield</font></strong></p> <p><strong><em><font face="Arial Narrow" size="2" color="#00FF00">Buy when the coloured lines trend higher,</font><font face="Arial Narrow" size="2" color="#C0C0C0"> </font><font face="Arial Narrow" size="2" color="#FF0000">sell when they trend lower</font></em></strong></p> <p><strong><font face="Arial Narrow" size="2" color="#C0C0C0">This tool indicates the historical relationship and generally expected future development of the variable most closely correlated with exchange rate movements - namely the premium or discount of real domestic interest rates over international levels. Where available, rates at both short three-month and long ten-year ends of the yield curve are shown. For comparability, exchange rates have been rebased to set year-end 1994 at 100.</font></strong></p> <p><strong><font face="Arial Narrow" size="2" color="#C0C0C0">In each chart the currency index is shown as </font><font face="Arial Narrow" size="2" color="#FFFFFF">the thick white line </font><font face="Arial Narrow" size="2" color="#C0C0C0">on the right hand axis. The main explanatory variables, short-term interest rates shown as</font><font face="Arial Narrow" size="2" color="#FFFF00"> the yellow line</font><font face="Arial Narrow" size="2" color="#C0C0C0">  and long-term interest rate premiums shown as </font><font face="Arial Narrow" size="2" color="#00FF00">the light green line</font><font face="Arial Narrow" size="2" color="#C0C0C0">, use the left hand axis. Best Guesses as to the future development of the variables are also shown on the left hand axis. The Best Guess for interest rates is the </font><font face="Arial Narrow" size="2" color="#FF0000">thin orange line</font><font face="Arial Narrow" size="2" color="#C0C0C0">. The Best Guess for long-term rates is</font><font face="Arial Narrow" size="2" color="#008000"> </font><font face="Arial Narrow" size="2" color="#00FF00">the light green line</font><font face="Arial Narrow" size="2" color="#008000">.</font></strong></p> <p><strong><font face="Arial Narrow" size="2" color="#C0C0C0">Best Guesses show what would happen to the premiums based on forecasts for interest rates and inflation both at home and abroad. Depending on whether the investment perspective is Dollar-based or relative to a global benchmark, the relevant foreign forecasts are those for the United States or a GDP-weighted global average. Forecasts are based on consensus estimates.</font></strong></p> <p><strong><font face="Arial Narrow" size="2" color="#C0C0C0">Owing to the conversion of legacy currencies into Euros, analysis is provided on the common currency, rather than for individual countries. Historical data is provided by creating synthetic GDP-weighted time-series for the component currencies, expressed in the European Currency Unit.</font></strong></p> <hr color="#FF0000"> <p align="center"><font size="2">[ <a href="global_asset_allocation_sitemap.htm" target="_top">Site Map</a> ] [ <a href="index.htm" target="_top">Home</a> ]</font><font size="2" face="Arial"><br> </font><font size="2">[ <a href="Chart_Library.htm" target="_top">Chart Library</a> ] [ <a href="ChartLibrary_foreign_currency.htm" target="_top">Forex Charts</a> ]</font> </td></tr></table><table border="0" cellpadding="0" cellspacing="0" width="100%"><tr><td><font face="garamond, times new roman, times" mstheme> <p align="left"><font face="Arial Narrow" size="1" color="#C0C0C0">Copyright © 1999 Professional Investment Tools Ltd., authorised by the Financial Securities Authority. An Independent Financial Adviser. Please read Financial Health Warning and Licence Agreement. UK laws apply exclusively. Principal sources: Consensus Economics, Corel Corp., FIBV, Global Financial Data, PIT, national governments and stock exchanges. Information and opinions are based on sources believed to be reliable and accurate. However PIT does not guarantee this to be the case, and does not accept liability for any loss arising. This is for information only and does not constitute a solicitation to deal in any securities. Opinions are liable to change. Past performance is no guarantee of future success. Last modified: January 05, 2001</font><font face="Arial Narrow" size="2" color="#C0C0C0"><strong>.</strong></font></p> </font mstheme></td></tr></table></body>