Business | Markets
Euro declines as economy shows signs of slowdown
Hopes are high for the dollar to build on its gains against major currencies provided April retail sales do not fall more than expected
- Special to Gulf News
- Published: 23:37 May 10, 2008
Dubai: According to a panel of economic forecasters, the growth outlook for the second half of this year has deteriorated despite some flicker of improvement in US financial markets and a temporary boost from the economic stimulus package.
The overall bias still seems to be pro-dollar, primarily due the euro losing steam with investors convinced the euro zone economy is showing signs of a slowdown.
Euro
Speculation that the Federal Reserve may not trim interest rates again helped the dollar retain a strong standing against most currencies.
Mid-week, the euro plunged as euro zone retail sales missed consensus forecast and dropped 0.4 per cent during March.
The dollar shed most of its gains on Friday as American International Group (AIG), the world's biggest insurer, posted its largest ever quarterly loss.
This week, hopes are high for the dollar to regain its composure provided April US retail sales due Tuesday do not fall more than expected.
Range for previous week: $1.5284-$1.5593 (Dh5.6138- Dh5.7273).
Range for this week: $1.5300-$1.5600 (Dh5.6196- Dh5.7298).
Yen
The return of carry trades left the yen searching for a cushion as investors borrowed yen at low interest rates to invest in high-yielding currencies such as the Australian and New Zealand dollar.
Expectations that the Bank of Japan will keep interest rates at a low of 0.5 per cent in the months ahead also encouraged carry trades. However, the dollar's fall on Friday helped bolster the yen.
Range for previous week: 102.54 yen-105.58 yen (Dh0.034788-Dh0.035820).
Range for this week: 101 yen-104 yen (Dh0.035317- Dh0.036366).
Sterling
The pound maintained a weak tone for most part of the week having made a decisive break below the $1.9600 level, pressured by a string of weak economic numbers out of UK.
First, Nationwide's measure of consumer confidence dropped to 70 from 77, the lowest reading since record-keeping began in May 2004.
Meanwhile, industrial production for the month of March unexpectedly slipped 0.5 per cent.
The pound was hammered to its lowest in almost two months on Friday as markets ignored the Bank of England's decision to hold interest rates intact this month and focused more on the strong possibility of an easing of rates as early as June.
The bank's quarterly inflation report along with the release of the consumer price index this week will be scrutinised for further insight into the direction of UK interest rates.
Range for previous week: $1.9456-$1.9771 (Dh7.1461- Dh7.2618).
Range for this week: $1.9400-$1.9700 (Dh7.1256- Dh7.2358).
- HSBC Global Markets Middle East
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