A batch of weak European economic data and concerns about the potential negative impacts of a stronger euro by European policy-makers pushed the greenback to a three- week high. This was the best monthly performance for the US currency which fuelled growing speculations that the Fed might be through with cutting interest rates.

Demand for the euro fell after Christian Noyer, a member of the European Central Bank, dampened speculation of any further increase in the euro zone?s interest rate. Jean-Claude Junker, on the other hand, shared his concerns for the euro?s excessive volatility which could undermine the euro zone?s economic growth. In addition, many analysts believed that the euro zone was not totally insulated from the global crisis following the batch of weak economic data that did nothing but gave clues as to the future outlook of the euro zone?s economic wellbeing. The European manufacturing activity indicator, the RBC/NTC Euro zone Purchasing Managers Index, fell to almost a three year low in April. Furthermore, report showed that Germany?s manufacturing activity and a reading of business sentiments also declined. The headline IFO fell to a much lower-than-expected to 102.4 in April, it?s lowest since 2006.

Towards mid-week, the euro was down 0.6 percent at $1.5893 in New York trading, after falling as low as $1.5862. The euro had traded at its highest level at $1.6019 since inception in 1999 due mostly to ECB?s official Christian Noyer?s comments that the ECB?s main concerns were inflationary pressures.

In the US, on the other hand, the number of US workers filing initial claims for unemployment benefits fell unexpectedly, triggering a sell-off in the euro, said analysts. However, market players expected that the ECB to keep key interest rate at 4.0 while the US Federal Reserve might be cutting overnight borrowing rate by another 25 basis points this week. The US dollar traded at MUR 26.422 yesterday same as last week.

Sterling buckled after the UK?s mortgage plans and a batch of economic data failed to impress investors. Annual house price inflation in England and Wales slowed to its weakest level since mid-2005 this month. Despite the fact that the Bank of England came to the rescue plan to lend banks up to 50 billion pounds to help them maneuver through the credit squeeze, some analysts remained skeptical as to how far could liquidity be restored in the market after the strains that had started since August of last year. On the other hand, news in the market was that the Royal Bank of Scotland, Britain?s second largest bank, would be announcing a share issue of $20 billion in an attempt to bail out the sector. However, the pound received a blow when the BoE minutes showed that the nine-strong Monetary Policy Committee had six votes for the month?s 25 basis point cut to 5 percent, one vote for a bigger 50 basis point move and two votes for unchanged rates. These votes had fuelled expectations that the BOE would cut UK?s interest rates 25 basis point in June.

The Sterling was traded at MUR. 52.38 When compared to MUR 52.58 last week.

The Japanese yen firmed broadly as a slide in Asian stocks prompted investors to trim risky yen carry trades, in which players use the low-yielding Japanese currency to finance purchases of high-yielders. In addition, traders also took profit on the dollar?s recent rise against the yen.

The Japanese yen was traded at MUR. 26.06 When compared to MUR 25.65 last week.

<B>HSBC Mauritius Treasury and Capital Markets Vassan Caleemootoo</B>