Last week?s trading on the currency market saw the dollar enjoy its strongest run against the major currencies since the first week of the year, when it unexpectedly jumped higher. The dollar edged up to a fresh six-week high against the European single currency, as investors calculated the US currency would get a further boost from rising US interest rates.

The greenback had been riding on a wave of bullish sentiment earlier in the week after the Federal Reserve suggested it could raise US interest rates more aggressively if inflation heats up. Figures on last Wednesday which showed core US consumer prices rising at the fastest year-on-year pace since 2002 substantiated the possibility of further US interest rate hike. The Fed had raised US interest rates by a quarter-percentage point at seven straight policy meetings, but the chance that it might switch to half-percentage-point increases could help lure more foreign investors to short-term dollar deposits.

<B>Rising oil prices</B>

However, the dollar?s roughly 3.5 percent climb against the euro could hardly constitute a dollar-buying trend, as dollar-buying spree was driven mainly by investors scrambling to cover short dollar positions. Market attention should focus on US data due out this coming week, particularly the March payroll report, which should shed further light on the outlook for US interest rates.

Against the Mauritian rupee, the euro was trading at MUR 37.89 as compared to MUR 38.45 last week.

Over the week, the dollar held near a six-week peak versus the yen, trading at around 107.00 yen per dollar. So long as the market is focused on what US economic figures may indicate about future Fed moves, Japanese data, including the Bank of Japan?s closely watched tankan survey at the end of this week, could have limited sway over the market.

Business sentiment in the quarterly poll, also due out this coming Friday, will probably improve marginally in March but will likely remain subdued due to slack exports and rising oil prices. Yesterday, the Japanese currency was offered at MUR 27.40 as compared to previous Tuesday?s 27.90.

Sterling slipped against the dollar, after US Federal Reserve raised US interest rates to 2.75 percent and hinted more aggressive action may be needed to curb inflationary pressure. Sterling further suffered, as the Bank of England looked set to leave UK interest rates on hold for at least another month.

In his testimony to parliament?s Treasury Select Committee on last Thursday, Governor Mervyn King said that the central bank was still hedging its bets on the outlook for the British consumer. Minutes of the MPC?s March meeting released last week showed members had voted 7-2 to keep rates on hold, with two members voting for a rate hike from the current 4.75 percent. The text of the minutes prompted market doubts about an imminent UK interest rate rise.

Yesterday, the pound was trading at MUR 54.71 as against MUR 55.37 last Tuesday.

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

■ Wednesday 30 March US GDP

■ Thursday 31 March Euro zone economic and consumer sentiment, US Jobless Claims, US NAPM, US Durable Goods, US Chicago PMI, Japan Tankan

■ Friday 01 April US Unemployment

■ Monday 04 April Euro zone PPI

■ Tuesday 05 April Euro zone Retail Sales, US Redbook

<B>Contribution by HSBC</B>