The Federal Reserve?s decision to raise interest rates by 25 basis points for a 17th straight time came as no surprise and helped to quell some of the nervousness in the market. However, in its policy statement, the Fed left open the possibility that the two-year campaign might end as early as August.

Interest rate futures had already factored approximately 60 percent chance that the Fed would hike up rates by 25 basis points. This was down from 80 percent the previous week. In a key change to its accompanying statement, the Fed stated ?that economic slow down should help to limit inflation pressures overtime?; hence, completely omitting the line ?further policy firming may yet be needed??.

Indeed, analysts explicated this subtle but crucial change in the statement rhetoric as the Fed putting an easy end to its tightening campaign. Most of the dollar rally in June was on the back of hawkish talks by Fed officials formulating their will to combat inflation.

Speculations of more rate hikes by the Fed and other central banks across the world propelled global equity market to unprecedented highs and market players rushed in to purchase the dollar in attempts to find a safe harbor for their money.

However, the dovish statements from the Fed put an end to that craze for the US currency. The market shifted its focus to the June job data in attempts to find clues of where the US currency was heading. The June job payroll would be carefully watched and a stronger than expected job data could set the ball rolling for another hike in August.

The US dollar traded at MUR 31.01 yesterday compared to MUR 30.99 last week.

The Sterling started the week on weak footing due mainly to the expectation that the interest rates in the UK would be on hold as opposed to interest rates in the eurozone. However, as expectations for another rate hike in the US started to wane, investors started covering up their short Sterling positions. The sell-off in the US currency gathered momentum when the US core prices came out dovish.

On the other hand, the pound got a face-lift from an upward revision for the first quarter UK growth data. Economic growth in the UK got revised up to 0.7 percent on the quarter due to a higher estimate for business activity. In addition, monthly consumer confidence barometer rose to ?4 in June from ?5 in May.

These data indicated that better growth forecast led to more economic buoyancy which in turn might support the case for a rate hike. All these were positive support to the battered pound.

The Sterling was traded at MUR.57.53 as against MUR 56.85 last week.The Japanese yen also recovered throughout the week. In a statement, the Bank of Japan stated that it would start raising rates as early as July to help support the economic recovery from nearly a decade of deflation. The yen got a boost from an upbeat Tankan survey that produced a headline diffusion index of 21 for June, just a tad lower from 20 in March.

However, the yen rally lost steam as importers and mutual funds managers snapped up the US currency. The yen was sold at MUR 27.34 as compared to MUR 26.94 last week.