Which Way the Euro?

The International Economy asked a dozen or so global experts where the dollar/euro exchange rate will be two years from now -- and why? Here's the scored: Average of predictions: 0.96-1.10(*)

NAME                         EXCHANGE RATE

Wayne Angell                 "0.80 - 0.95."
Chief Economist & Senior
Managing Director,
Bear Stearns

Jonathan Webb                "0.80 - 0.95."
Director, Proprietary
Trading & Global Foreign
Exchange, Credit Suisse
First Boston, London

David Berson                 "0.96 - 1.10."
Vice President & Chief
Economist, Fannie Mae

Michael R. Englund           "0.96 - 1.10."
Chief Economist,
Standard & Poor's

Willem Kooyker               "0.96 - 1.10."
Chairman & CEO,
Blenheim Investments, Inc.

Holger Schmieding            "0.96 - 1.10."
Chief Economist Europe,
Investment Banking,
Merrill Lynch, London

David Resler                 "0.96 - 1.10."
Managing Director,
The Nomura Securities
Co., Ltd.

Edward Yardeni               "0.96 - 1.10."
Chief Economist,
Deutsche Bank

Alison Cottrell              "1.05 - 1.20."
Chief International
Economist,
PaineWebber
International, London

Kathleen Stephansen          "1.10 - 1.15."
Senior Vice President
& Chief International
Economist,
Donaldson, Lufkin
& Jenrette

Lorenzo Codogno              "1.11 - 1.25."
Head of European
Economic Research, Bank
of America

Robert Dederick              "1.11 - 1.25."
Economic Consultant,
Northern Trust Company

Paul DeRosa                  "1.11 - 1.25."
President, Simpson Co.,
LLC

Joachim Fels                 "1.11 - 1.25."
Co-Head of Currency
& European Economics,
Morgan Stanley Dean
Witter, London

Melvyn Krauss                "1.11 - 1.25."
Senior Fellow, Hoover
Institution, Stanford
University

NAME                         REASONING

Wayne Angell                 "Low unemployment rates for both labor
Chief Economist & Senior     and capital in the United States will
Managing Director,           keep the percentage rate of return on
Bear Stearns                 real capital higher than in Euroland.
                             Direct investment and fixed income
                             financial flows continue to favor the
                             United States. As German tax reform is
                             phased in and other European countries
                             follow the Germans, the euro will end
                             its downward slide."

Jonathan Webb                "As the U.S. economy weakens
Director, Proprietary        temporarily, improving the growth
Trading & Global Foreign     differential for the Euro-zone, the
Exchange, Credit Suisse      euro should be well supported over the
First Boston, London         next year. However, over the two-year
                             time horizon, the relative dynamism of
                             the U.S. economic model will reassert
                             the trend appreciation of the dollar."

David Berson                 "As long as economic growth in the
Vice President & Chief       United States and Euroland is similar
Economist, Fannie Mae        for the next couple of years, exchange
                             rates should not move far from their
                             recent range."

Michael R. Englund           "Both interest rate differentials and
Chief Economist,             the growth gap between the United
Standard & Poor's            States and Europe should partially
                             close over the coming two years,
                             allowing the exchange rate to move
                             toward purchasing power parity."

Willem Kooyker               "Euroland is currently experiencing
Chairman & CEO,              excellent growth and will probably
Blenheim Investments, Inc.   continue to do well. But the U.S.
                             economy will also remain quite viable
                             and continue to attract good capital
                             investments for the time being which,
                             of course, will offset our very
                             negative trade balance. Euroland's
                             undermining influence is the political
                             uncertainty and no build-up of
                             credibility for the ECB. The
                             confidence-inspiring attitude
                             and decision making of the Fed are
                             far superior to that of the ECB and the
                             European bickering over Ecofin doesn't
                             exactly create a positive tone for a
                             currency."

Holger Schmieding            "The United States remains strong, but
Chief Economist Europe,      it is losing its first mover advantage
Investment Banking,          in the information technology
Merrill Lynch, London        revolution. As a reformed Europe is
                             catching up, the dollar should end up
                             at US$1.06/euro."

David Resler                 "Improving euro economics will attract
Managing Director,           more capital from abroad."
The Nomura Securities
Co., Ltd.

Edward Yardeni               "The euro transformed Europe's many
Chief Economist,             small capital markets into one huge
Deutsche Bank                capital market overnight as of 1999.
                             This market will increase Europe's
                             competitiveness by stimulating new
                             enterprises and innovations, much the
                             same way as it happened in the United
                             States over the past decades. As our
                             two economies converge, so should the
                             dollar/euro exchange rate to parity."

Alison Cottrell              "Broadening and deepening capital
Chief International          markets, combined with robust growth
Economist,                   (reinforced by significant tax cuts in
PaineWebber                  most EMU countries in 2001and 2002)
International, London        point to a rising euro over the next
                             couple of years. There are early to
                             mid-2002 risks, however -- the odd euro
                             wobble on any teething problems in
                             introducing euro notes and coins,
                             and/or heightened intra-Euroland
                             political tensions surrounding the
                             French elections."

Kathleen Stephansen          "While both the growth and interest
Senior Vice President        rate differentials between the United
& Chief International        States and Europe will have narrowed by
Economist,                   then, thereby supporting the euro
Donaldson, Lufkin            relative to the dollar, the
& Jenrette                   productivity gap between the two
                             economies will remain wide, thereby
                             mitigating any rebound in
                             the euro. As long as investors perceive
                             that the return on real capital
                             investment is greater in the United
                             States than in the Euro-zone -- thanks
                             to productivity gains that are
                             greater in the United States than in
                             Europe -- foreign capital will be
                             attracted to the United States."

Lorenzo Codogno              "The euro is expected to appreciate
Head of European             toward 1.12 -- 1.15 to the U.S. dollar
Economic Research, Bank      two years from now, under the combined
of America                   effect of a sharp reduction in the
                             growth gap (and the growth outlook!),
                             and no more attractive opportunities
                             in the euro area as a result of
                             corporate restructuring and moderate
                             structural reforms."

Robert Dederick              "The United States has had its growth
Economic Consultant,         spree -- now it's Europe's turn."
Northern Trust Company

Paul DeRosa                  "European Investors eventually will
President, Simpson Co.,      tire of buying American assets."
LLC

Joachim Fels                 "Deregulation, tax cuts, and IT catch-
Co-Head of Currency          up will allow European economic growth
& European Economics,        to outpace U.S. economic growth in this
Morgan Stanley Dean          decade. Thus, capital flows will
Witter, London               increasingly favor the euro at the
                             expense of the U.S. dollar."

Melvyn Krauss                "First, Europe will make substantial
Senior Fellow, Hoover        progress weighing on the euro -- in
Institution, Stanford        particular, European labor markets will
University                   become more flexible following the
                             Dutch model. Second, the problem of
                             accession will be resolved by limiting
                             the number of participants."

(*) Using the midpoint of predicted ranges.