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Dubai: The past week was marked by the US dollar posting its worst weekly performance against the euro in 2008 to date after economic data reignited fears of an impending recession in the US economy.
Markets await a slew of US data in the coming week, including the consumer prices and housing starts data due on Wednesday and the weekly jobless claims reading due on Thursday. Minutes from the Fed's last policy-setting meeting are scheduled to be released on Wednesday.
Euro
The euro commenced the week on a hawkish note boosted by the comments of policymakers. European Central Bank (ECB) President Trichet stressed at the weekend G7 meeting at Tokyo that there was no call to move euro zone interest rates up or down at the last policy meeting, while Governing Council member Alex Weber told a newspaper that the ECB had not relaxed its view on inflation risks. The comments appeared to be aimed at toning down markets' expectations of future monetary easing by the ECB.
The dollar found a temporary reprieve after billionaire investor Warren Buffett told a TV channel that he had offered to reinsure $800 billion worth of municipal bond liabilities of moniline bond insurers, easing some worries about further fallout of the credit crisis. Meanwhile, a surprisingly strong reading of the German business sentiment did little to support the euro.
Euro rose against the dollar later during the week, as a better than expected US retail sales data, solid Australian employment report and Japanese economic growth data improved risk appetite and helped soothe worries about global economy. The dollar was further pressured after Fed Chairman Ben Bernanke said in a Senate testimony that the US economic outlook had worsened and that the central bank would act as needed to support growth.
Weak economic data including a record low reading for New York State manufacturing index combined with ECB officials stressing that inflation is a bigger concern than growth, helped push dollar lower against euro and other major currencies as the week closed.
Last week's range: $1.4480 to $1.4709 (Dh5.3185 to Dh5.4026)
Range for this week: $1.4550 - $1.4850 (Dh5.3442 - Dh5.4544)
Yen
The Japanese currency started the week on a strong footing, benefiting from a risk averse mood in the markets as worries about global growth and falling equity markets prompted investors to exit risky carry trade bets funded by cheap borrowing in the yen. The dollar got a boost against the yen as US retail sales data released during the week showed a 0.3 per cent rise in January, contrary to market expectations of a slight drop, easing some concerns about the health of the US economy.
The yen however gained ground as the week closed with more US economic data rekindling fears that the economy continues to move towards recession. Last week's range: 106.32 yen - 108.61 yen (Dh0.033818 - Dh0.034547)
Range for this week: 106.00 yen - 109.00 yen (Dh0.033697 - Dh0.034651)
Sterling
Sterling commenced the week on the back-foot with markets expecting interest rate cuts by the Bank of England (BoE). Data showing that UK consumer price inflation in January was not as high as expected caused the pound to fall.
The pound was further hammered against the dollar as weak UK house price data backed the view that interest rates are headed lower soon. British house prices fell at their fastest pace in at least a decade in the three months to January according to a survey.
The BoE inflation report released during the week, however, signalled that the BoE would cut rates only modestly in the next few months after the Monetary Policy Committee said inflation was likely to overshoot its two per cent target if it eases aggressively. The pound rose against the dollar after the report, and hit a two-week high against the euro. Sterling however weakened against the dollar as the week closed.
Last week's range: $1.9400 - $1.9738 (Dh7.1256 - Dh7.2498)
Range for this week: $1.9450 -$1.9750 Dh7.1440 - Dh7.2542)
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