Risk appetite grows on back of Fed statement

Dubai: Risk appetite continued to grow last week. It was the surprise announcement by Federal Reserve Chairman Ben Bernanke that became the highlight of the week as it jump started the markets.

This week, event risk will be present but not as important. The final reading for fourth quarter GDP may present modest revision and a lot of housing data will likely do little to turn the industry out of its deep recession. Of greater interest will be Friday's personal spending and income numbers.

With the growth in risk appetite the euro appreciated against the dollar most of last week. Stocks rallied and there was a strong correlation between them and the euro. The gains during the week were boosted by the Fed announcement as the euro shot up shortly after.

Risk appetite was the major factor for the euro as the only significant data to come out of the euro zone was inflation, unemployment and investors confidence, and they did not play much of a role in price action.

Job losses in the euro-zone accelerated in the fourth quarter as the quarterly rate of employment fell 0.3 per cent compared to a decline of 0.1 per cent in third quarter. Data showed that euro zone CPI rose in February for the first time since September at a rate of 0.4 per cent, which pushed the annual rate up to 1.2 per cent from 1.1 per cent. Core measure of CPI went up to an annualised rate of 1.7 per cent from 1.6 per cent.

Range last week: $1.2834 - $1.3737 (Dh4.7139-Dh5.045)

Range this week: $1.3000-$1.3900 (Dh4.7749 5.230)

British pound

The British pound saw a declining trend at the beginning of last week, but it was pulled out of that by the Federal Reserve's surprise announcement. The UK has been suffering poor economic data and to add insult to injury the IMF has projected the UK's 2009 recession to be the worst in the industrialised world.

Range last week: $1.3844-$1.4596 (Dh5.0849 Dh5.3611)

Range this week: $1.4050 - $1.4850 (Dh5.1605 Dh5.4544).

Yen

The Bank of Japan had its rate decision meeting this weekend but as it is already at 0.1 per cent they had no room to move.

The market was watching to see if any comments would be released with regard to currency intervention.

Japan is in the same boat as Switzerland, where their currency is appreciating against the currencies of their largest trading partners, and when Switzerland mentioned currency intervention all eyes turned to Japan to see if the Bank of Japan would adopt a similar approach.

Range last week: 93.52 yen-99.00 (Dh0.039275 Dh0.07101)

Range this week: 93.0 yen 99.15 (Dh0.039494 Dh0.03704)