The greenback going through rough times

Last week saw the dollar navigating in troubled waters against major currencies across the board. In fact, the dollar was powerless to post major gains during most of last week trading sessions.

On Friday, the dollar took a blow when US GDP and housing data indicated that the economy grew slightly less than in the last quarter of 2004 as compared to what was initially forecasted by the Federal Reserve. The US economy grew only by 3.8 percent while Federal Reserve officials stated that they expected the GDP figure to be around the 4 percent figure.

The US currency was eventually hammered by a less-than-stellar US existing home sales data. Single-family home sales fell by 0.5 percent to 5.94 million units rate in January as opposed to 5.97 million in December.

Other US economic data released on Monday showed personal income to be consistent to expectations. In January, personal income fell by 2.3 percent, slightly less than the 2.6 percent fall expected by economists.

The market is now looking to next week?s US manufacturing and payrolls reports. Many analysts believe that currently a tug-of-war exists between the dollar-positive factors of interest rates hikes and robust economic growth and the persistent negatives of massive US current account and budget deficits. Against the MUR, the dollar gained 8 cents over a week to trade at 29.1092 yesterday.

The sterling briefly hit a 2005 record against the dollar on Monday, as investors were on the lookout for clues that would clarify the British interest rates outlook.

However, the dollar rallied back as data showed that Britain?s consumer confidence eased in February and a Bank of England official rang a dovish tone to the prospect of an interest rate hike.In addition, housing report showed that house prices fell for the eighth consecutive month in February, leaving the annual gain at only 3 percent.

With the housing market, the key uncertainty in British economic outlook, stabilizing, investors were concerned that the Bank of England might not hike up interest rates from the current level of 4.25 percent.

Against the MUR, the sterling gained 62 cents to trade at 55.90 yesterday.The yen was buoyed against the dollar and the euro last week, after data showed Japanese industrial output posted stronger growth than expected in January.

This indicated that the Japanese economy might be recovering from the recession of last year. This robust data boosted yen bulls to buy back the yen. During the month of January, Japan?s industrial output escalated by 2.1 percent. Furthermore, retail sales grew at a pace faster that it had grown for the past years. Against the MUR, the yen gained 13 cents to trade at 27.97 yesterday.