The dollar succumbed to profit-taking on Friday in New York, as traders who had bid it up on stronger-than-expected US jobs data squared positions ahead of the week-end. The correction in the dollar extended through to Tokyo sessions on Monday, with the euro trading near the 1.15 level, though the rally started losing steam later during European trades. Underpinning the original dollar buying bout was strong US data that showed a generation of 126,000 new jobs last month, which took the unemployment rate from 6.1% to 6.0%.

Admittedly, though the US economic recovery has not produced the job growth seen in previous business cycles, it would appear that the corner has been turned. In fact, the dollar ascent started earlier last week, after data painted a surprising rebound in Q3 Gross Domestic Product (GDP). The Institute of Supply Management subsequently delivered a bullish report, showing manufacturing activity reached its highest level since January 2000, whilst the latest weekly jobless claims issued on Friday showed a surprise 43,000 drop. Given the upturn in recent indicators, a debate has actually cropped up in the market over the US Federal Reserve intentions. In particular, the debate is over whether the Fed is actively seeking an exit strategy from its commitment to keep interest rates low for a ?considerable period?. Since the close before Q3 GDP was released on October 30 through the US jobs report on November 7, the yield on the US 2-year Treasury note has jumped 40 basis points to over 2 pct. Indeed, whilst recent market polls showed most world economists do not expect a rate hike by the first half of next year, some of them have brought forward the timing of such a rate increase.

Against the Mauritian rupee, the common currency was trading at MUR 32.95 as compared to MUR 32.97 a week earlier.

The yen retreated on Monday morning in Asia on the back of falling Tokyo stock prices, which was thought to have been ignited following the re-election to power of Premier Junichiro Koizumi?s LDP, albeit with a reduced minority. Stock losers were mainly banking shares, after the dip in the number of LDP-held seats clouded prospects for reform. Given the renewed mandate for Koizumi, it was thought that changes to the current régime?s foreign exchange policy would only be uninspiring. In its latest quarterly report, Japan said it spent some 7.5512 trillion yen ($69.09 billion) on yen-selling intervention in the July-September quarter ? a record high for a quarter ? in order to stem the yen?s rise and protect the country?s export competitiveness. The data additionally showed that the intervention was carried entirely in the dollar ? yen market, and that Japan did not intervene in the

period when the G7 held its recent meeting. At that time, the yen faced considerable upward pressure on speculation that the G7 would criticize Japan interventionist policy.

Yesterday, the Japanese currency was offered at MUR 26.45 as compared to MUR 26.23 on last Tuesday.

Sterling took its cue from the dollar?s downward correction on Monday, shrugging off its bearishness following the rate increase by the Bank of England (BoE) last Thursday. The BoE became the first G7 country to hike rates after it increased its benchmark interest rate by 25 basis points to 3.75 per cent for the first time in four years. Sterling drew only fleeting support from the rate increase as traders took profit on the currency which had risen on speculative trading ahead of the BoE meeting. Analysts argue that the market may have over-priced successive rate increases in the price of the pound, such that the scope for further sterling gains potential may have diminished. The UK rate increase came after the Reserve Bank of Australia raised its official cash rate by 0.25 per cent to 5.0 per cent last week.

Yesterday, the pound was trading at MUR 47.96 as against MUR 48.23 on last Tuesday.

Major data - events this week:

• Wed 12 November GB BoE inflation

• Thu 13 November Ger GDP Q3, US international trade, US jobless claims, US PPI, JP GDP Q3

• Fri 14 November EZ Q3 GDP, US retail sales

• Mon 17 November ?

• Tue 18 November GB PPI, EZ industrial production

Contribution by HSBC