Weekly Currency Roundup
May 27-May 31, 2007
Local FX Market
The demand for US dollar was stable in the week. There was ample liquidity in the market, and the dollar rose slightly against the Bangladeshi taka this week.Money Market
Overnight money market was stable. The call money rate was range bound throughout the week and most of the deals ranged between 6.75-7.50 percent. International FX Market
This week the US dollar recovered against the euro and was near a six-week high, backed by the fact that US Federal Reserve will not cut its benchmark interest rate anytime soon. The euro was range bound against the dollar, in spite of good growth expectation from the Eurozone economies. The yen remained steady against the dollar and gained ground against the euro, after hitting a record low the week before. US dollar
The US dollar gained ground against the euro, despite weak housing data for the month of April released the previous week. Minutes from the Fed's May meeting showed that policymakers felt inflation was their main worry and that growth should recover as the year drags on. The May non-farm payrolls report on Friday is expected to show a rise, while a snapshot of manufacturing activity is seen holding up well in May. This cooled expectation that the Fed would not cut its benchmark interest rate anytime soon. Euro
The euro lost ground against the dollar after hitting record high in April. The market was relatively unfazed by robust comments from European Central Bank policymakers on Eurozone growth and by a statement from China's deputy central bank governor that the euro's share in China's central bank reserves was set to grow. The euro ranged between $1.35 and $1.34 although traders expect the euro to be above the $1.34 level. However, a break of $1.34 would probably trigger a deeper pull-back in the euro, traders said. Yen
The yen remained flat against the dollar, but gained back some of the losses it had incurred against the euro. The low yielding yen looked weak as investors continued to invest in high yielding currencies, funding their carry trades will low yielder like the yen. The Bank of Japan is not expected to raise its interest rate of 0.25 percent any time soon, which has severely hurt the Japanese currency this year. - Standard Chartered Bank
| 
