Last week trading on the currency market saw the dollar fall within range of its record lows against the single currency, whilst trading near multi-month lows against other major currencies. Tepid prospects for the US economy, worries about its ability to attract global investors, widening deficits and uncertainty over the outcome of the presidential election all combined to cast a shadow on the US currency.

Even last Thursday’s better-than-expected US economic data failed to brighten the bearish dollar. Moreover, a string of euro supportive comments from several euro zone policymakers about the euro’s recent rise also added to the dollar’s misfortune.

Remarks from Bundesbank Vice President Juergen Stark that he did not expect the current level of the euro to pose a lasting threat to Germany’s economy, along with European Central Bank Governing Council member Vitor Constancio, that the rising euro was helping to soften the pain of higher oil prices, provided support to the single currency. Comments from ECB Executive Board member Jose Manuel Gonzalez-Paramo that he was “not at all” concerned about the euro/dollar exchange rate gave the markets the fuel to push the dollar further down. Better than expected Ifo business climate index for Germany further boosted the euro.

UK economy to its weakest pace

Against the Mauritian rupee, the euro was trading at MUR 37.03 as compared with MUR 35.98 a week earlier.

Over the week, the Japanese yen strengthened against the dollar, as the greenback’s tumble across the board dominated market movements. Yen firmed below the 107 level per dollar and might be eyeing the $103 level. But the yen strengthening might be gradual due to concerns that the Japanese government might intervene to sap the yen’s strength. Finance Minister Sadakazu has already hinted his ministry would take action if the yen’s value deviated from economic fundamentals.

Yesterday, the Japanese currency was offered at MUR 27.14 as compared to previous Tuesday’s exchange rate at MUR 26.47.

Sterling rose to a two-month high against the greenback, as the dollar stayed under pressure across the board. The pound had rallied earlier in the week after better-than-expected retail sales lifted some of the recent gloom on the domestic economy. However, pound’s gains were kept in check after UK data showed the UK economy slowed sharply in the third quarter to its weakest pace since early last year.

Gross domestic product rose by just 0.4 percent in the three months to September, lower than the forecast for a 0.5 percent gain. That was the weakest quarterly growth rate since the first quarter of last year.

Yesterday, the pound was trading at MUR 53.19 as against MUR 51.85 last Tuesday.

Major data/events this week:

■ Wednesday 27 Oct US Durable goods, ■ Thursday 28 Oct US Jobless Claims ■ Friday 29 Oct Euro Zone Economic and Consumer Sentiment, US GDP, US NAPM, US Chicago PMI, ■ Monday 01 Nov US ISM Manufacturing, US Consumer Spending ■ Tuesday 02 Nov -

Contribution by HSBC