The Fed lowered rates to near zero in December 2008 and began promising to keep rates exceptionally low for an extended period soon afterward. With the economy recovering gradually from a deep and damaging recession, the Fed has said it is in no hurry to tighten borrowing conditions, but many in financial markets believe that dropping the extended period pledge will be the Fed's first step in that direction.

A top US Federal Reserve official said on Tuesday he thinks the time to drop the Fed's promise to hold rates low for a long time might be drawing nearer. However, Federal Reserve Chairman Ben Bernanke mentioned in his testimony that a moderate US economic recovery is likely to guarantee very low interest rates for a long time, especially that inflation is not an immediate concern, giving the Fed room to maintain its highly simulative policies. Overall, his comments still suggested caution about the recovery.

Euro

The euro started the week appreciating against the US dollar after an EU source said euro zone leaders had reached a deal on terms of a possible emergency loan to help Greece manage a worsening debt crisis. The rescue plan eased worries about Greece defaulting on its debt in the near term and creating a domino effect on other countries with deep fiscal problems.

European Central Bank president Jean Claude Trichet said central bankers worldwide are working on ways to avoid another economic crisis, adding that a global mechanism is likely to be required to prevent a future crisis.

The euro continued its sliding trend against the greenback on reports indicating that the US roadshow to sell Greek sovereign debt was getting a moderate response. Fears of infection rose as the cost of insuring against a Portuguese default hit its highest since February, after the European Commission on Wednesday said the country may need additional fiscal cuts this year.

Range for previous week: $1.3350-$1.3650. (Dh4.9035 -Dh5.0137. Range for this week: $1.3691-$1.3470 (Dh4.9475-Dh5.0314)

Sterling

Sterling rose to a seven-week high versus the euro and a six-week high against the dollar at the start of the week on better than expected UK data, but analysts said structural problems facing the UK would hamper gains in the long term. Data showing UK industrial output rose 0.5 per cent in February had already boosted sterling sentiment.

Sterling ended the week under pressure and traded 0.5 per cent lower after a historic first television debate between the leaders of the three major UK political parties highlighted the possibility an upcoming general election may leave no party in overall control.

Consumer inflation data due this week is forecast to show a 3.2 per cent gain in March, still well above the Bank of England's target.

Range for previous week: $1.5250-$1.5550 (Dh5.6013-Dh5.7115). Range for this week: $1.5334-$1.5523 (Dh5.6321-Dh5.7047)

Yen

The yen fell against the dollar early last week after a group of Japanese ruling party lawmakers called on the government to try to push the yen down to around 120 yen to the dollar to help beat deflation. The Japanese currency reacted directly to the draft proposal and fell sharply.

The lawmakers also urged the central bank to carry out drastic monetary easing until deflation is completely beaten, a move likely to add to pressure on the Bank of Japan (BoJ) to do more to end price falls.

Japan's finance minister suggested on Monday he favours a weaker yen and repeated he would not ask the BoJ to increase its debt purchases, indicating government pressure on the central bank to ease policy is driven more by the currency. However the yen rose broadly on Friday, hitting a one-week high versus the dollar and the euro as falling stocks heightened risk aversion.

Range for previous week: 92.00 yen-95.00 yen (Dh0.038663-Dh0.039924). Range for this week: 91.88 yen-93.71 yen (Dh0.039195-Dh0.039999)

— HSBC Global Markets Middle East