To: Jes Stale
From: Jeffrey Epstein
Sent Thur 5/6/2010 2:38:31 PM
Subject keep confidential„ nytimes
<u>Reserve Losses pdf</u>

Forwarded messa e From: Landon Thomas Date: Thu, May 6, 2010 at 10:16 AM Subject: Fwd: Central Banks' Losses from EURUSD this Year: USD300 Billion and Counting To: "Epstein, Jeffrey" <u><jeevacationagmail.com></u>

time  to double down?

---------- Forwarded message ----------

From: Stephen L Jen

Date: Thu, May 6, 2010 at 2:59 PM

Subject: Central Banks' Losses from EURUSD this Year: USD300 Billion and Counting
To: Stephen L Jen <>

# Central Banks' Lossesfrom EURUSD this Year: USD300 Billion and Counting

Stephen L Jen

May 6, 2010

Bottom line: Central banks have sustained USD300 billion in valuation losses (YTD) from the depreciating euro. The level ofangst at these central banks may be elevated now and the risks are rising that some ofthese central banks de-rate the euro.

Total foreign currency reserves held by all central bank have reached USD9.0 trillion, with the top-8reserve holders managing some US$5.3 trillion. Of this latter amount, US$1.55 trillion (or 30°A) ofthe total) is heldin euros. Corresponding to the 10% depreciation in EURUSD year-to-date, the top-8 reserve holders may have suffered close to USD200 billion in valuation losses, and for all central banks the total valuation loss has been around USD300 billion. We guesstimate that China (SAFE) may have suffered a US$80 billion in EUR valuation losses, US$14 billionfor Russia, and US$7 billion for Korea. These

# Central Banks' Lossesfrom EURUSD this Year: USD300 Billion and Counting (cont.)

figures do not include actual andpotentialfurther losses on their underlying holdings of European bonds.

If dollar-to-euro EURUSD diversification trades down in the to past 1.2150, decade <u>all</u> will of the be monetary lost. gainsfrom the

- dollar-diversification (1) Central banks' strategy, reserve now managers that the are euro presumably is alsofound reconsidering to be less than their a perfect 'anti-dollar'.

(2) The risks offurther declines in the euro and a possible debt rescheduling in Europe are likely to be sources of additional worriesfor central banks with large exposures to the euro.

(3) In addition to central banks being concerned about the euro, the euro-selling process has only just begunfor the large real money institutionalfunds, and the potentialfor much largerfunds to reduce their euro exposures is significant

Since January, my mental targetfor EURUSD has been 1.20. However, I now think the risk to EURUSD is heavily biased to the downside relative to thisfigure.

slj

Stephen L len
Managing Director of Macroeconomics and Currencies

<mark>BLUEGOLD</mark>

BlueGold Capital Management LLP
4 Sloane Terrace, SW1X 9D0
London, UK

W: www.bluegoldcap.com

# Central Banks' Lossesfrom EURUSD this Year: USD300 Billion and Counting (cont.)

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# Central Banks' Lossesfrom EURUSD this Year: USD300 Billion and Counting (cont.)

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# Central Banks' Lossesfrom EURUSD this Year: USD300 Billion and Counting (cont.)

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