Year-end holidays help cool down fluctuations

The market has been relatively stable for the past week with lower volumes traded, financial institutions and companies were closing positions and covering their exposures for the end-of-year reports and statements.

The Christmas and year end holidays have also helped cooling down the week in terms of fluctuation and volumes.

The rate cut by the Fed to a historic low near zero the week before, the speech by Jean-Claude Trichet (ECB president), and the rate cut of the Bank of Japan (BoJ) were the major data releases which affected market movements.

The Greenback depreciated against major currencies after the aggressive rate cut made by the Federal Reserve as expected, although the effect was less than expected.

Bad data on the US growth, housing, and unemployment have also added pressure on the dollar. The main idea within the markets remains "more gloomy news, longer recession ahead."

Euro

The euro has ranged between $1.3899 and $1.4123 and closed at $1.4062, recovering from heavy losses against the dollar a couple of weeks ago.

Affected by the speech of the European Central Bank president the currency spent the majority of the week consolidating against the dollar.

The ECB president who is taking a "wait and see" attitude toward interest rates has focused on the strength of the euro zone and its actions.

Jean-Claude Trichet has focused on the importance of the steps taken by the ECB during 2008 and said that the main responsibility and duty is to maintain price stability in the Euro Zone.

The dollar fell one per cent against the euro in the past week and was up about 1.5 per cent versus the British pound and could breach parity.

Range for previous week: $1.4650 - $1.4850 (Dh5.3809 - Dh5.4544).

Range for this week: $1.3899 - $1.4123 (Dh5.1051 - Dh5.1874).

Yen

A tough start for the Japanese yen last Monday when the BoJ Governor said that Japan's economy was deteriorating and situation is expected to be more severe.

The currency moved in a narrow range though, in a light-trade week, between 89.09-90.98. BoJ has lowered the interest rates to close to zero last week following the US Fed Reserve, and started to inject funds into the market to ease the credit crunch, with expectations that the Government might be forced to do more.

Range for previous week: 88.50 - 91.00 (Dh0.040362 - Dh0.041468)

Range for this week: 89.09 - 90.98 (Dh0.04123 - Dh0.04037).

Sterling

The British pound started the week under pressure against the US dollar hitting a two-week low, and a record low against the euro as worries about the miserable UK economic outlook and with the worries of the widening gap between the UK and the Euro Zone.

The currency is getting weaker and likely to be more bearish as investors are being cautious and unwilling to be players. The Bank of England is considering a rate cut to zero along with fiscal stimulus mirroring the Fed and BoJ.

Range for previous week: $1.4850 - $1.5250 (Dh5.4544 - Dh5.6013).

Range for this week: $1.4645 - $1.4990 (Dh5.3791 - Dh5.5058).

- HSBC Global Markets Middle East

The greenback depreciated against major currencies after the aggressive rate cut made by the Federal Reserve as expected, although the effect was less than expected.