The dollar received its first blow for year 2006, when it fell to near session lows on Tuesday, after the minutes from Federal Reserve?s policy meeting of December insinuated that the tightening phase of monetary policy could be coming to a halt.

Actually the vulnerability of the Greenback was already felt when the US manufacturing survey for December came out bearish. Furthermore, the Institute for supply management stated in a report that national factory activity in the US fell to 54.2 in December from 58.1 in the prior month. Despite the index held above 50, denoting expansion in the sector, it fell short of economists? expectation of 57.5.

The main driver of the dollar bullishness in the past years, was the series of interest rate hikes launched by the US Federal Reserve nudging overnight borrowing rate to 4.25 percent. The campaign also enhanced short-term dollar-denominated assets and made it attractive against other major currencies such as the euro and the yen.

Towards the end of the week, dollar sentiment remained weak, as the Friday?s US non-farm payroll data were weaker-than-expected. December payroll rose just by 108,000 compared to economists? forecast of 200,000.

Against the Mauritian rupee, the dollar was trading at MUR 30.798 same as a week earlier.

<B>The Sterling clawed back some ground</B>

The pound started the New Year on a sour note, having a batch of wrong cards stacked against it. The Eurozone service sector activity for December surged to unprecedented high in 23 months and employment grew to 4-1/2 year high, firming expectation of future interest rates hikes in the euro zone. Despite the UK service sector activity also showed an upturn for the month of December, those data were not robust enough to overshadow the eurozone data. Furthermore, market players were moving on with an expectation that the Bank of England would cut borrowing cost in the first quarter of this year.

However, the Sterling joined on in a broad rally with other major currencies against a greenback weakened by dovish US non-farm payroll. Further optimism was obtained when British Retail Consortium?s monthly retail sales data for the month of December indicated that customer spending was buoyant. UK Halifax report on UK house prices showed that property prices rebounded by 1.0 percent and would likely stabilize given a reasonably healthy UK interest rates.

Against the Mauritian rupee, the Sterling was trading at MUR 54.56 yesterday as compared with MUR 53.35 a week earlier.

The yen was propelled to fresh new high this year to 113.93 yen against the US currency, due to a broad weakening of dollar sentiment. According to many dealers, the move of the yen thru key technical barriers against the dollar was very positive. Commenting on the volatility of the yen as opposed to other major currencies, the Japanese Finance Minister Sadakazu Tanigaki stated that the Japanese currency?s volatility was mainly a reflection of market fundamentals. In addition, analysts believed that the statement by the Tanigaki could predict that the Bank of Japan might not intervene in the market to curb yen volatility. Against the Mauritian rupee, the yen was trading at MUR 27.02 as compared with MUR 26.41 a week earlier.