It certainly would make calculations a lot easier for everyone, but most experts say that the drop in the euro and the yen’s rise last week are not based in any fundamental reality, hence are temporary in nature.

In our November 22nd issue, Marc Chandler, chief currency strategist for Mellon Bank, remarked that the euro’s recovery since its July lows has been anything but smooth. He also noted that despite some damage inflicted by the ECB’s rate hike, it was too early to conclude that the euro is headed for new lows.

Is it too late now? “I suspect the market is in an overshoot condition,” notes Mr. Chandler. Short-term reactions to Germany’s distance for hostile takeovers, for example, have been overplayed.

“Current price levels do not reflect fundamentals, values, or anything else but flows in a very thin market. The rubber band is being stretched beyond reason and I’d expect it to snap back, if not before, early next year.”

For the rest of 1999, the euro’s fortunes may continue to defy forecasters’ expectations. Mr. Chandler sees the euro ending the year at near $.9850 and the dollar near ¥98.