The US dollar was broadly resilient over the past week on a trade weighted basis. However, it was unable to make headway against European currencies. The dollar's gains were also curtailed by increased risk appetite, resulting in reduced safe haven flows for the currency on grounds of optimism over the global economy. The non-farm payroll data released on Friday confirmed that the trend in the US job market remains upward with the headline figure showing a 162,000 increase, compared to the anticipated 184,000 figure.

Looking to the week ahead the most important factor determining the dollar will be how aggressive the risk appetite response will be. If US equities surge and other asset classes follow suit for a delayed response, the dollar is likely to experience safe haven flows. In addition to this, the currency could also gain should the influence of the jobs data dissipate over the weekend.

Key data releases from the US this week includes US pending home sales, ISM non-manufacturing composite reading, as well as initial jobless claims, all of which are expected to show an improved reading.

Markets will also look towards the Federal Reserve's review of the discount lending rate tomorrow.

The Federal Reserve's review is likely to result in another hike to the rate at which banks borrow from the central bank itself. While this does not carry the same weight as a hike to the Fed Funds figure, it would still strengthen a hawkish stance.

Euro

The euro managed to resist further selling pressure over the past week and experience some price correction against the dollar and the yen as some speculative positioning against the currency was scaled back, ending the week near $1.35 against the dollar.

Following the support deal for Greece agreed upon the previous week, immediate fears surrounding the debt situation were assuaged. The Greek government issued a five-billion euro (Dh25 billion) bond to take advantage of improved market conditions. However, there was still a yield premium over German bunds, which indicate that underlying investor confidence is still quite fragile.

Range for previous week: $1.3000-$1.3600 (Dh4.7749-Dh4.9952). Range for this week: $1.3344 - $1.3597 (Dh4.9013-Dh4.9941)

Sterling

Sterling managed to secure some relief over the past week as selling pressure eased and traders covered extreme short positions after record highs. The currency pushed above $1.5250 and also strengthened to a month-high near 0.888 against the euro. However, analysts remained wary over the UK's political scenario, which has hurt sterling since the start of the year.

These fears were quelled to an extent following opinion polls showing that the opposition Conservative party had increased its lead over the Labour Party to 10 percentage points.

Sterling was further supported by positive data about the UK's economy.

It is likely that risk sentiment will continue to play a large role in sterling's bearings.

The Bank of England policy meeting on Thursday is unlikely to see any policy change. Other event risk for sterling include industrial and manufacturing production figures on Thursday, and the producer price index on Friday.

Range for previous week: $1.4650-$1.5380 (Dh5.3809-Dh5.6490). Range for this week: $1.5110-$1.5365 (Dh5.5499-Dh5.6435)

Yen

The yen remained generally weaker over the past week as markets were sensitive to policy changes surrounding new government appointments. The dollar increased to a four-month high against the yen to reach around 93.75 before encountering profit-taking.

Following the confirmation of Naoto Kan as the new finance minister, there was increased speculation that the government would adopt a less robust stance in easing government spending.

The yen was also hit by increased risk appetite as signs of global economic recovery dampened the appeal of the currency.

Looking to the week ahead, important economic data releases from Japan include the Bank of Japan's interest rate decision, trade balance and current account balance on Wednesday. The Bank of Japan is expected to keep interest rates steady at 0.1 per cent, which the trade balance is expected to show an increase to 762.8 billion yen.

Range for previous week: 91.50-93.50 yen (Dh0.039283-Dh0.040142). Range for this week: 93.80 yen-96.84 yen (Dh0.037931-Dh0.039157)

— HSBC Global Markets Middle East