Throughout the most part of last week the dollar remained on the defensive against the euro. Weak US manufacturing figures and crude oil inventories data pressured the greenback to hovering around the 1.2175 level per euro. Currency traders were mostly cautious, avoiding huge euro/dollar positions that came ahead of the much-awaited US jobs data due last Friday.

The figures released on Friday showed job growth and an unexpected dip in the US unemployment rate in August. The data bolstered speculation of a dollar- boosting US interest rate hike later this month and immediately set off a rebound in the US currency which firmed towards the 1.2075 level per euro.

The relatively solid jobs data helped to temporarily assuage the market’s concerns over the durability of the US economic recovery. However, they were not decisive enough to provide long-term support to the dollar.

At time of writing yesterday, the market was awaiting US Federal Reserve Chairman Alan Greenspan’s assessment of the US economy. The market expects Greenspan to reiterate the Fed’s stance that US interest rates will rise at a moderate pace and to be fairly optimistic about US economic recovery. However, traders doubt the impact that a 25 basis points hike in US rates will have on the dollar since that hike has already been fully priced into the current dollar rate. Furthermore, analysts are questioning whether Greenspan’s assessment will be upbeat enough to give a further boost to the greenback.

Against the Mauritian rupee, the dollar was offered at 28.79 yesterday against 28.76 a week earlier. The euro was offered at 34.71against 34.75 on the previous Tuesday.

The sterling slumped to three-week lows against the dollar on growing market perception that UK interest rates have come close to their peak and will hardly go any higher. This perception was further strengthened by weaker-than-expected UK August manufacturing data that showed the most sluggish growth since February. This was reinforced by weak housing data that pointed to a slowdown in the UK housing market. A series of recent data releases have reinforced the view that the UK economy and housing market are losing steam.

Against the Mauritian rupee, the Sterling was offered at 51.33 yesterday against 51.74 a week earlier.

The yen suffered from the dollar rebound although its losses were limited by strong corporate spending data which lifted the Nikkei stock average to a fresh five-week high and increased expectations of an upward revision to second-quarter GDP this Friday.

Against the Mauritian rupee, the Yen was offered at 26.23 yesterday against 26.30 a week earlier.

Major data/events this week:

Wednesday 08 Sep US Mortgage data

Thursday 09 Sep German international trade

US manufacturing

UK international trade

Bank of England decision on interest rates

Friday 10 Sep

US international trade,

Producer Price Index

French international trade

Monday 13 Sep

UK Producer Price index

French industrial production

Tuesday 14 Sep UK Retail Price index

US retail sales

French manufacturing