Dollar under considerable event risk during week ahead

The US dollar was one of the weakest currencies over the past week as investors shunned the greenback in favour of higher yielding currencies and riskier assets.

The dollar fell to a 14-month low against the euro on Wednesday over improved corporate earnings.

Both JP Morgan Chase and Intel Inc revealed vastly improved third quarter earnings, sending indices soaring. The Dow industrials closed above 10,000, up 145 points, and the S&P index rose 19 points.

Looking to the week ahead, event risk for the dollar will begin on Tuesday with the US housing starts and building permits. The figure is projected to have risen for the second straight month in September to 10-month highs, with starts anticipated.

Euro

The euro finished the week considerably higher against the dollar. The risk sensitive euro relied on rallies in broader risk trends instead of economic fundamentals. .

Range for previous week: $1.4600-$1.4950 Range for this week: $1.4753- $1.5056

Sterling

Sterling endured a torrid week, declining against most major currencies on the back of mixed fundamental data releases before staging a pullback on Friday. The sterling comes under heavy event risk over the coming week, as minutes from the Bank of England's (BOE) October meeting, along with UK third quarter GDP figures carries the potential to cause heavy volatility in the currency.

Range for previous week:$1.6050-$1.6250

Range for this week: $1.6257-$1.6463

Yen

The yen continued to suffer from a rebound in sterling as a short-covering squeeze on Britain's currency spilled into cross/yen pairs. The pound jumped to as high as $148.79, a three-week high, after rallying 3 per cent on Thursday.

Asian shares traded at 14-month highs last week and some analysts say share prices have raced up too far ahead of economic fundamentals.

Range for previous week: 88.00- 91.00 yen

Range for this week: 89.87-91.91

HSBC Bank Middle East Limited