What does PIMCO expect for the euro and the British pound in 2010?
Balls: We maintain an overweight in high-quality emerging market currencies versus OECD currencies, in particular versus OECD countries that are not large commodity exporters. This means in euro-denominated portfolios we may want to be underweight the euro versus emerging market currencies; and in British pound–denominated portfolios we plan to be underweighted the British pound versus emerging market currencies. In accounts and in portfolios where we’re limited to OECD currencies only, we may not take significant currency positions. Q: Interest rates are still at record low levels. What does PIMCO expect from the ECB and the BoE in 2010 – only words or also action? Balls: Starting with the ECB, we expect a gradual withdrawal of the emergency liquidity provision but no dramatic moves. The ECB has made it fairly clear that while they want to withdraw emergency measures over time, and they do not want the market to extrapolate that this will be followed by any near-term increases in the
