The US economic fundamentals had offered some disappointing domestic growth trends when judged with the standard of earlier cycles. Market players saw no other choice but the Federal Reserve Bank cutting rates aggressively in an attempt to cope with the US?s financial implosion. On the other hand, growths in the euro zone and in Japan were remarkably buoyant, fuelling expectation that the European Central Bank and the Bank of Japan might be hiking interest rates after all.

The greenback started the week on a weak footing, pressured by traders? anticipation of more hawkish talks from ECB officials on inflation. In fact, the Federal Reserve?s March policy-meeting released last week showed that policy members believed that the US would suffer a prologue and severe economic downturn. This reinforced the expectation that the FED would keep on cutting interest rates as much as another 25 basis point cut this month boosting the euro?s yield advantage against the dollar. This caused the euro to vault to a session peak of $1.5812, just shy of the record peak of $1.5905.

Interest rate future, the yardstick of measurement for market sentiment toward Fed monetary policy, was pricing in a probability of a 44 percent chance of a 50 basis points cuts at the April 29-30 meeting. Since mid-September, the Fed had lowered its benchmark overnight lending rate by 3 percent to 2.25 percent. News that the FED was considering further steps to address liquidity reminded investors that the credit crisis was not over yet.

Toward mid-week, the dollar got a breath of oxygen when traders uncovered their short positions soon after ECB Chairman President Jean-Claude Trichet?s went dovish on his economic outlook for the euro zone as compared to the past month. Immediately, the euro?s rally lost steam and sunk to $1.5754 despite US data showed that US trade deficit widened unexpectedly to $62.3 billion in February from $59.billion in January.

The US dollar traded at MUR 26.5230 yesterday when compared to 26.52 last week.

Sterling had been plagued from a series of misfortunes despite the fact that the Bank of England kept UK?s interest rates unchanged at 5 percent. According to economists, the lack of any decisive action on the part of the BOE was exacerbating the credit crunch and sparking concerns from about a forthcoming meltdown of the UK housing market. Besides, the surprisingly bearish British home prices spooked investors who believed that the housing market was in bigger trouble than initially expected.

Furthermore, the International Monetary Fund gave another blow to the pound when it downgraded the UK?s growth forecast to 1.6 percent for this year as compared to a forecast of 2.0 percent.

The Sterling was traded at MUR. 52.38 When compared to MUR 52.77 last week.

The yen continued its rally against the US dollar as Japanese exporters and life insurance institutions started to sell dollars. The Japanese currency got additional support after the Japan?s upper house of parliament approved acting Bank of Japan Governor Masaaki Shirakawa as the central bank?s permanent head and the former finance minister official Hiroshi Watanabe as deputy governor.

The Japanese yen was traded at MUR. 26.20 When compared to MUR 25.92 last week.

■ Major data/events this week:

■ Wednesday 16 Apr: US Mortgage index

■ Thursday 17 Apr: US Jobless

■ EZ retail Sls

■ Friday 18 Apr:

■ Monday 21 Apr:

■ Tuesday 22 Apr: US Redbook

HSBC Mauritius Treasury and Capital Market