Business | Markets
Focus shifts to rate outlook as dollar extends loss
In the week ahead markets will await US and European inflation data and speeches given by central bankers to form a snapshot view of the economy's health and estimate how fast and far interest rates may rise.
- Special to Gulf News
- Published: 00:00 March 19, 2006
In the week ahead markets will await US and European inflation data and speeches given by central bankers to form a snapshot view of the economy's health and estimate how fast and far interest rates may rise.
Euro
The dollar was holding firm against the euro at the beginning of the week after rallying the previous week on data showing the US non-farm payroll figure rose 243,000 in February.
However, the greenback soon lost ground as traders locked in profits ahead of the release of a series of US economic data, that would give investors some clue as to how much further the Federal Reserve will raise interest rates.
The euro zone currency was further supported after the release of a report citing that the UAE central bank contemplated holding more of its reserves in euros.
The reserves were estimated at $23 billion in December.
As the week progressed, dollar weakness continued with the release of weak US data and the release of a report by an influential consulting group suggesting the Fed may be near the end of its tightening cycle.
The greenback was also pressurised by a government report showing that the current account deficit in the US had widened to a record $224.9 billion in the fourth quarter.
This was larger then the $217.7 billion forecast by analysts.
The euro strength against the dollar was further supported with hawkish comments made by ECB Governing Council Axel Weber, who said that he saw upward risks to inflation in the euro zone and the European central bank would act as needed.
However, the US currency soon recovered some ground after the ZEW institute's German March expectation indicator came out weaker than expected.
As the week came to a close the greenback traded at seven-week lows against the euro after the release of tame US inflation data.
Last week's range: $1.1908-$1.2207 (Dh4.3740 to Dh4.4839)
Range for this week: $1.2040-$1.2340 (Dh4.4225 to Dh4.5327)
Yen
The dollar started trading near a one-month high against the yen after the release of upbeat US data the previous week.
As the week progressed the dollar failed to hold onto its gains against the Japanese currency with the release of a report by Medley Global Advisors who suggested the Fed may be near the end of its tightening cycle.
By the end of the week the dollar was still weak against the yen, with the release of the US net capital inflow figure, which was insufficient to cover that months trade deficit.
Last week's range: 115.67 to 119.20 yen (Dh0.030815 to Dh0.031756)
Range for this week: 114.35 to 117.35 yen (Dh0.031301 to Dh0.032122)
Sterling
Sterling started the week on a weak note, hitting a 10-week low against the greenback. Furthermore, speculation in the market for the BoE to cut interest rates as early as May was also pressurising the British currency.
Sterling's misfortunes continued with the pound falling to a seven-month low against the euro after breaking a key technical level.
As the week progressed, the pound ignored the monthly rise in British unemployment.
Last week's range: $1.7231-$1.7595 (Dh6.3293 to Dh6.4630)
Range for this week: $1.7410-$1.7710 (Dh6.3950 to Dh6.5052)
- HSBC Global Markets Middle East
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