Dollar up or down, money traders profit
Strolling from his art-filled office through a bulletproof door to a balcony overlooking an immense trading room, Cairo-born André Levy pauses to deny a bit of gossip circulating among his fellow money dealers in Lausanne, Switzerland. He insists that it is just not true that his firm — somewhat whimsically named Tradition S. A. — exchanges half a billion dollars for stronger currencies each day. The actual figure, he states with aplomb, is "more than a billion dollars."
That correction is indicative of the frenzy with which corporations, banks and other holders of dollars are stampeding to unload them. The selling has driven the dollar down 19% against the German mark, 27% against the Japanese yen and 34% against the Swiss franc in the past year. Washington seems incapable of stopping the slump; even optimistic statements by the White House nowadays often have a perverse effect. Last week, for example, President Carter said at his news conference that congressional passage at long last of his battered energy legislation should trim the U.S. trade deficit and bolster the dollar. Next day the dollar hit yet another record low against the deutsche mark, dropped against the Swiss and French francs, the Dutch guilder and the British pound, and even sank to a 31-month low against the weak Italian lira. The apparent reason: moneymen concluded that if this is all the hope Carter has to offer, the dollar is still in trouble. Confidence in the dollar has so eroded that it sometimes plunges sharply these days with no specific news at all to account for the drop.
Money traders like Levy are, consequently, in the eye of a financial hurricane. Though they mostly act on orders from clients rather than initiate trades, they do the actual swapping of dollars for other currencies. And since their arcane business is little understood, they inevitably come under suspicion of abetting the recurrent panics that often cause the dollar to plunge further than any reasonable calculation of its purchasing power would warrant. As Otmar Emminger, head of the West German central bank, complains, "The currency markets have become absolutely irrational."
Surprisingly, many of the money traders agree, though they are making profits out of the irrationality, which they blame on their clients. Asks André Scaillet, chief money trader in Europe for First National Bank of Chicago: "Can you tell me if it's logical to have a 7½% [downward] movement of the dollar against the Swiss franc in a single day? It's out of this world!" Money traders worry quite as much as any finance minister about what the drop in the world's central trading currency is doing to the global structure of finance. Says Michel Grare, trader for Credit Lyonnais, a major French bank: "It's very worrying if one can't believe in the U.S. What, after all, is Switzerland? It could be fragile." Not a few money traders openly pine for the pre-1973 days of fixed exchange rates, when their business was quiet and orderly — much less profitable, to be sure, but infinitely less tearing on the nerves.