Greenback likely to remain in tight range against euro

Dubai: The US dollar saw its smallest weekly trading range against the euro since July 2007, underlining market indecision as the greenback trades near significant lows against a broad range of major counterparts A relatively quiet week of US economic event risk suggests that the greenback could remain within a tight range against the euro, but any significant moves in ‘risk' could quite easily push the dollar in either direction through upcoming trade.

Euro

For the past six weeks, the euro has been more or less unstoppable in its rally. Against the US dollar that isn't necessarily saying much; but this currency has shown remarkable progress against nearly all of its major counterparts in that period — denoting an inherent fundamental strength.

While the euro's benchmark rate is still looking at the biggest cumulate advance over the coming 12 months; the intensity of that expected climb has decelerated.

Delving into the rate debate, we note that there is zero chance of another rate hike at the next ECB meeting according to overnight index swaps from Credit Suisse.

Range for previous week: $1.4362-$1.4520 (Dh5.2751-Dh5.3331). Range for this week: $1.4300-$1.4600 (Dh5.2523-Dh5.3625)

Sterling

While most of the major currencies have become firmly anchored to broad-based trends in risk sentiment, the British pound has stubbornly refused to fall in with the herd, opting to remain preoccupied with relative monetary policy considerations.

The last rate decision saw a 6-3 vote in favour of keeping borrowing costs and the QE asset-purchase target unchanged. In the two weeks since the BoE sit-down, inflation figures showed price growth slowed for the first time in six months in March and other leading economic indicators turned noticeably sour. With that trajectory in place, a rate hike in the near-term seems decidedly out of the question.

Range for previous week: $1.6225-$1.6426 (Dh5.9594-Dh6.0332). Range for this week: $1.6200 - $1.6500 (Dh5.9502-Dh6.0604

Yen

The yen strengthened sharply in Asian trading on Tuesday as risk conditions deteriorated sharply. The Japanese central bank warned over the economic outlook and the nuclear crisis at the Fukushima complex was upgraded to level 7. The dollar did find support close to the 83.00 area and attempted to rally, but the yen proved more resilient as underlying risk appetite remained fragile.

The Japanese Cabinet office downgraded the econ-omic outlook, maintaining the increase in fears surrounding the economy. The budget outlook will remain an important focus with further market expectations that funding pressures will intensify. Finance Minister Noda stated that he had asked G7 members to act in the currency markets when needed. There will be further speculation of action to prevent a renewed yen surge.

Range for previous week: 82.94 yen-85.18 yen (Dh0.043120-Dh0.044285). Range for this week: 83.00 yen-85.50 yen (Dh0.042959- Dh0.044253).