<B>CURRENCY</B> movements were held to a minimum last week, as traders in major centres, including London, Europe and Hong-Kong wound down ahead of the long Easter break. With illiquid market conditions, active players, for instance, Middle East traders, were wary of taking aggressive positions, such that large ad-hoc price swings were seen.

Prior to Friday, the dollar closed off near recent highs versus the single currency, at 1.22 per euro, after upbeat employment data gave the greenback a thumb up. The latest jobless claims fell to 328,000, much lower than expected. The data provided further evidence of a firming US labour market, being released barely one week after robust non-farm payrolls boosted the US currency.

Nevertheless, the dollar quickly relinquished its gains after the geopolitical situation worsened in Iraq. Besides fears of terrorist retaliation, investors were concerned the US might commit more funds to Iraqi operations, which would ultimately be borne by tax-payers. As with all conflicts, the Swissie and gold fetched higher prices during the trading sessions, as investors looked for safe bets in the face of uncertainty. On Tuesday afternoon, the dollar has set a new four-month highs versus the euro around 1.1925 per euro, after US retails sales rose 1.8 percent in March.

Against the Mauritian rupee, the common currency was trading at MUR 32.64 as compared with MUR 32.63 a week earlier.

The yen went through a roller-coaster ride during the week, as the market successively digested good news followed by bad ones. On Wednesday, it got a boost after credit rating agency Moody?s upgraded Japan?s foreign-currency denominated debt to the highest possible level. This fuelled up the yen?s gains ? already on an uptrend from 112 yen to 104 yen per dollar since late March, after Japan hinted it had stopped its massive yen-selling currency intervention in the market.

On Friday though, the yen rally abruptly reversed upon newswire report that three Japanese civilians were abducted by a hitherto unknown Iraqi group, Saraya al-Mujahideen, which threatened to immolate the hostages. Over the Easter Break, the yen hardly budged, as the market awaited news over the fate of the hostages. Observers argue that a mishandling of the crisis could damage the popularity of Premier Junichiro Koizumi, whose ruling Liberal Democratic Party faces an Upper House election in July.

Yesterday, the Japanese currency was offered at MUR 25.81 as compared to MUR 25.86 on last Tuesday.

Sterling remains muted over the Easter break, with several market-players away from their trading desks. Earlier, it retreated after the Bank of England (BoE) left interest rates unchanged at 4.0 percent, wrong-footing many in the market who had hoped for a rate hike.

It must be said that the release of soft manufacturing data earlier during the week had somewhat dampened market confidence over a rate hike, but the BoE has remained the most hawkish G10 central bank until now, in terms of tightening interest rate. Nonetheless, expectation is still rife in the market that the central bank would raise rates, possibly as soon as its May meeting.

Yesterday, the pound was trading at MUR 49.85 as against MUR 49.32 on last Tuesday.

<B>Major data-events this week:</B>

Wednesday 14 April

German CPI, US CPI

Thursday 15 April

US jobless claims, NY Fed Manufacturing

Friday 16 April

GB ILO unemployment,

US industrial production,

US Michigan Preliminary

Monday 19 April

GB PPI, EU industrial

production

Tuesday 20 April

GB RPI, Ger ZEW index

<B>Contribution by HSBC</B>