Dollar rebounds after positive US employment data

Dubai: French economy minister Christine Lagarde last week called for a change in rate policy on one side of the Atlantic or the other saying the difference between US and euro zone interest rates was too big.

The Fed again lowered interest rates to two per cent and left the door open for further easing, which helped to put pressure on the dollar, as investors expected the Fed to pause in its easing campaign that started in September.

However, the dollar extended its gains near a two-month high against major currencies after US jobs data and news about the injection of additional liquidity by major central banks to stabilise credit markets.

Euro

The dollar strengthened against the euro on Monday, after comments from European Central Bank (ECB) President Trichet that currency swings could unbalance Europe's economy. ECB Governing Council member Klaus Liebscher also said he was "very, very concerned" about euro zone inflation.

Again on Tuesday, Trichet said in newspaper interviews that the euro zone economy appeared to be reasonably resilient in the first quarter of 2008, and that the ECB decides on interest rates every month on the basis of the latest data.

The euro ended the week near a two-month low against the dollar. Reports showing that manufacturing activity shrank less than expected in April and consumer spending rose in March led to decreased investor worries about the depth of the recession in the US economy.

Range for previous week: $1.5553-$1.6018 (Dh5.7142- Dh5.8850).

Range for this week: $1.5359-$1.5692 (Dh5.6420- Dh5.7655).

Yen

The yen commenced the week depreciating against the dollar, as investors started to use low-yielding yen to fund investments in higher yielding currencies and assets as they shifted back into risky carry trades.

While the Fed left the door open for further interest rate cuts, data released by the end of the week give indications that the Fed may actually hold interest rates in the future. The yen ended the week at a two-month low against dollar after positive US jobs data on Friday.

Range for previous week: 102.65-104.81 yen (Dh0.035044-Dh0.035792).

Range for this week: 103.20-105.69 yen (Dh0.034724-Dh0.035610).

Sterling

The pound fell against the dollar and the euro after data showing British consumer sentiment hit a 16-year low and also on figures showing British retail sales were the weakest in two-and-a-half years, indicating that sluggish consumer demand is driving UK economic weakness.

The pound ended the week higher against the dollar and the euro after the Bank of England's Financial Stability Report, said the scale of losses from the credit crunch may not be as bad as feared and after data showing the British manufacturing sector slowing down.

Range for previous week: $1.9675-$2.0027 (Dh7.2286- Dh7.3580).

Range for this week: $1.9622-$1.9964 (Dh7.2013- Dh7.3348).

- HSBC Global Markets Middle East