Weekly Currency Roundup
January 28-February 01, 2007
Local FX Market
US dollar eased in the last week on back of comfortable supply.
Money Market
Overnight money market was steady throughout the week. The call money rate remained unchanged throughout the week and ranged between 6.25 and 6.75 per cent.
International FX Market
The dollar scaled a four-year high against the yen at the beginning of the week on Monday, supported by solid US economic data that helped persuade investors that the Federal Reserve may not cut interest rates this year. Stronger than expected December US durable goods orders and new home sales released on Friday were the latest in a series of robust figures that have convinced investors the world's biggest economy can avoid a hard landings and may not need a growth-boosting rate cut from the current 5.25 per cent. In contrast, Japanese inflation data came in below expectations last week and Monday's retail sales numbers for December showed a fall year-on-year, suggesting the Bank of Japan may find it difficult to justify a rate hike at its February meeting. The dollar was up a quarter of a percent on the day against they yen, having earlier hit a 4-year peak. The euro also gained 0.2 per cent on the day against they yen, moving towards last week's record peak above 158.60 yen. The euro also rose against the Swiss franc, another low yielder, around 30 ticks off last week's 8-year high. The euro was steady against the dollar at on a quiet day for euro zone and US economic releases.During the middle of the week, the yen bounced against the dollar and rose versus the euro as jitters grew that the Group of Seven financial chiefs might raise concerns over the Japanese currency's recent weakness. Such worries escalated after the German finance minister, who will chair the G7 talks, said on Tuesday Europe's concerns about yen weakness would be raised at the meeting next week. Investors were reluctant to build sizeable positions ahead of the Federal Reserve's policy decision and a statement due later on Wednesday. The Fed was set to hold rates on hold at 5.25 per cent but the statement might reflect recent strong US data. The dollar was down 0.2 per cent against the yen. The euro was down 0.2 per cent against the yen. The euro was down 0.3 per cent against the yen, pulling further away from the record high hit last week. The euro was down 0.15 per cent against the dollar. The euro hit and 8-year high against another low-yielding currency, the Swiss franc. The dollar was back on the back foot on Thursday after the Federal Reserve said inflation pressures were likely to moderate, suggesting the US central bank would not raise interest rates in the coming months. Dollar sentiment also softened on growing wariness ahead of next week's meeting of financial officials from the Group of Seven industrialized nations in Germany. The Japanese currency was supported against the dollar and euro as market players hedged against the risk of the G7 saying something about the yen's broad weakness, especially as European officials have said the issue would be discussed at the Feb 9-10 meeting. - Standard Chartered Bank
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