The U.S. dollar falls.
"Following its August 26 peak, the dollar has literally crashed, first against the D-mark and Swissie, and then against the Yen. The collapsing dollar has set off a run [on] U.S. bonds, as overseas bond-buyers rush to cash in their profits. In the meantime, Europe's single new currency, the euro, has surged against the dollar" (Richard Russell's Dow Theory Letters, October 21, 1998).
The euro was valued at 1.12 U.S. dollars in October 1997 and surged to 1.24 U.S. dollars by October 1998. And that is before anyone can actually buy euros at the banks-which will not be possible until 2002. As strange as it may seem, "for three years the euro will exist only as a sort of virtual money alongside of the existing currencies" (ibid. November 18, 1998).
"Note: Consider this, the 11 'euro nations' have a net positive trade balance of $140 billion a year. The U.S. has a negative trade balance for above $100 billion a year. How long can this go on and the dollar still hold up?" (ibid. November 18,1998).
