Euro, pound and yen strengthen against greenback

Dubai: The biggest bank failure in US history and nose-diving banking stocks put pressure on the US Congress to agree this weekend to a $700 billion financial industry rescue to breathe life back into credit markets.

The bailout dominated barbed early exchanges on Friday evening in the first presidential debate between Republican John McCain and Democrat Barack Obama in the run-up to the November 4 election.

Euro

The greenback, amid volatile swings, has retreated against the euro this month since trouble in the US financial sector progressed from bad to worse, highlighted by last week's collapse of Lehman Brothers and the $85 billion rescue of the American International Group Inc.

The beleaguered dollar tumbled hitting multi-week lows against the euro as the US government's bailout plan to ease a financial credit crisis reignited worries about the country's massive budget deficit.

The euro however failed to make much headway against the greenback after eurozone sources said market expectations about European Central Bank rate cuts early next year or even sooner are reasonable. The euro tested as low as $1.4572 on Friday before ending the week at $1.4615 versus the US unit.

Range for previous week: $1.4490-$1.4865 (Dh5.3221- Dh5.4599)

Range for this week: $1.4500-$1.4800 (Dh5.3258- Dh5.4360)

Japanese Yen

The Japanese yen gained 1.6 per cent against the dollar last week and about 3 per cent this month amid heightened pressure in fin-ancial markets. The yen benefited as investors sold the high-yielding currencies such as the Australian dollar for the low-yielding, safe-haven yen as Republican and Democratic lawmakers clashed over the uncertainty of the financial rescue package. Bank of Japan Policy Board member Tadao Noda cautioned that the US economy could face a deeper adjustment after several major US financial institutions either collapsed or came close to it in recent weeks.

Range for previous week: 105.01 yen to 107.15 yen (Dh0.034279-Dh0.034977)

Range for this week: 104.50 yen to 107.50 yen (Dh0.034167- Dh 0.035148).

Sterling

The UK market paled in comparison to the US turmoil, with the British pound having strengthened against the dollar. Sterling weakened versus the yen, with investors wary of holding riskier assets as the US Treasury's proposed $700 billion bank bailout package ran into trouble. The pound was up 0.3 per cent on Friday at $1.8440 having tested a one-month high on Thursday at $1.8671.

Though sterling gained against the dollar, it outlook remained skewed towards a negative performance with analysts expecting little further upside amid UK's weak economic fundamentals.

Economists believe the Bank of England will lower interest rates from 5.0 per cent in the next few months with inflation seen peaking amid a growing risk of an even sharper economic downturn.

Range for previous week: $1.8261 to $1.8671 (Dh6.7072 to Dh6.8578)
Range for this week: $1.8300-$1.8600 (Dh6.7215 - Dh6.8317).