An official of a leading Swiss bank said today he believed the worst may be over for the dollar in foreign exchange trading.
But Richard Schait, senior vice president of the Union Bank of Switzerland, took a more cautious view of immediate prospects for the U.S. stock market.
"It seems that the dollar has more or less bottomed out," Schait said in remarks before the annual convention of the Securities Industry Association, Wall Street's main trade group.
"We at the Union Bank are impressed by the measures taken by the administration in order to strengthen your currency," he said. The measures announced on Nov. 1 included a drastic full percentage point increase in the discount rate, the rate the Federal Reserve charges on loans to its member banks.
The dollar came under new pressure today after the Commerce Department announced that U.S. exports in October declined by the largest amount in 10 months. But the dollar still stood well above record lows hit earlier in the fall.
The dollar's protracted slide against such other currenies as the Swiss franc has had a powerful negative impact on foreign investors in U.S. stocks, Schait pointed out.
"Investments worldwide have been negatively affected by the weak dollar and the losses incurred are tremendous. Many capital gains have been wiped out by currency fluctuations during the last years," Schait said.
For example, he noted that Standard & Poor's index of 400 industrial stocks at mid-November stood at about the same level as it had on Jan. 1. During this period, however, the dollar declined by about 20 percent against the Swiss franc, giving Swiss holders of U.S. stocks a substantial loss.
"At first glance U.S. stocks look very cheap. The stock market can adjust to high interest rates, but it cannot adjust to steadily climbing interest rates. The fact is that we still may have to face rising inflation and interest rates. The fact is that we still may have to face rising inflation and interest rates," he said in his speech.
Discussing the economic implications of the government's dollar rescue plan, Schait observed:
"We feel that the administration decided on Nov. 1 to accept a mild recession as early as possible; to get it underway and over with, hopefully by the end of 1979, in time to get a year of economic recovery before the November 1980 elections."