Greenback's downtrend likely to continue

Dubai: On Tuesday, S&P slapped a negative outlook on the US top-notch rating and said there was at least a one-in-three chance that it could eventually be cut unless the Obama administration and Congress find a way to slash the yawning federal budget deficit within two years. The dollar jumped and Treasury yields fell despite the threat of an S&P ratings cut suggesting investors were not worrying too much about the action while looking to see if Washington makes progress on reducing the deficit.

The dollar hovers near a three-year low versus a basket of major currencies, undermined by the spectre of low US interest rates and the crushing weight of the US budget deficit, with some players looking for it to test an all-time low when players return from Easter holidays. The dollar index stabilised at 73.992 after slipping to a three year low of 73.735 on Thursday. Many participants say the dollar's downtrend looks set to resume once players come back from holidays.

Euro

The euro started the week under pressure, falling to an 11-day low versus the US dollar around $1.4274 on increased talk that Greece will be forced to restructure its debt and uncertainty over a bailout for Portugal. The single currency's fall gathered pace after German government sources said they expected Greece will not make it through the summer without debt restructuring.

On Tuesday, the euro reversed the trend and rose against the dollar as investors rushed into risky assets due to strong US corporate earnings and signs the global economy is chugging along even as the Federal Reserve stays very cautious about when it will start to unwind its super-loose policy.

Talk that China may invest in Spain had investors shrugging off worries for now about the Eurozone.

Range for previous week: $1.4300 - $1.4600 (Dh5.2523 -Dh5.3625. Range for this week: $1.4155-$1.4649 (Dh5.2000-Dh5.3806).

Sterling

The Bank of England's Monetary Policy Committee came no closer to increasing interest rates this month as concerns about the strength of the economy outweighed inflation risks, further reducing the chance of a hike before August. The minutes said that despite the drop in inflation to 4 per cent in March, there was still a significant risk that inflation would exceed 5 per cent.

Sterling ended the week at a 16-month high versus the dollar at $1.6600, with thin trade ahead the Easter break.

Range for previous week: $1.6200-$1.6500 (Dh5.9502 -Dh6.0604). Range for this week: $1.6165-$1.6568 (Dh5.9374-Dh6.0854)

Yen

Japan's economy is likely to shrink in the second quarter and then resume growing in the third quarter as efforts to rebuild the northeast take hold. But damage to supply chains and factory output could remain. The yen continued its downward trend and strengthened against the US dollar even after data showed that Japan logged a smaller-than expected trade surplus in March.

One focal point for the yen is whether Japanese investors will step up their investments overseas in the new fiscal year that started this month, and there are signs that some are heading in that direction. Japan's third largest private life insurer, Meiji Yasuda Life, said on Tuesday it plans to increase its investment in foreign bonds.

The dollar dipped 0.2 per cent against the yen to 81.64 yen in a thin market, breaching the 82.00 level. Analysts said the longer-term bearish views on the yen remained intact with the Bank of Japan set to keep monetary policy ultra-loose, maintaining their funding-currency status.

Range for previous week: 83.00 yen-85.50 yen (Dh0.042959-Dh0.044253). Range for this week: 81.60 yen-83.26 (Dh0.044115-Dh0.045012)