Dollar?s rally knew no bound as it ravaged around like wild fires among dry bushes. It vaulted to a 10 month high against a basket of currencies as the plunge in crude oil prices stroked expectations of lower global inflation and interest rate cuts outside the US.

Oil prices retreated almost 30 percent from the July record peaks of near $150. Consequently, traders started to bet that inflation would ease in the next few months and that central banks would come up with more accommodating measures to stimulate economic growth. According to analysts, although the rapid decline in energy prices could dampen fears of recession in the US, if lower oil prices translated into an increase in consumer spending, interest rate differentials between the US and the euro zone could be thrown back into the ring causing another EUR-USD rally.

Furthermore, the greenback swing gathered momentum when the US government took over the two biggest mortgage finance agencies. The bailout of the beleaguered Freddie Mac and Fannie Mae, which owned or guaranteed half of the US? $12 trillion outstanding home mortgage debt, also prompted investors to take risky positions. The takeover of Fannie Mae and Freddie Mac did a lot to alleviate concerns about the systemic financial market risks, but slower growth in the euro zone and the UK would significantly support the dollar in the near term.

<B> The US dollar traded at MUR 29.73 as compared to MUR 29.01 as last week.</B>

The yen vaulted to a six-week high against the dollar as investors, spooked by tumbling stock markets and escalating global markets concerns, fled risky positions such as leveraged carry trades. The Japan?s Nikkei share average fell 2.5 percent after a sell-off on Wall Street. In addition, market players speculated that more hedge funds would be in trouble after news hit the market that Ospraie Management LLC, the world?s biggest commodities hedge fund, was forced to close its flagship fund. According to analysts, investors were bailing out of the leveraged carry trades whereby trading positions were taken by borrowing yen at low rates to buy higher yielding currencies and commodities.

<B> The yen was traded at MUR. 27.61 when compared to MUR 26.74 last week.</B>

Sterling got hammered by a resurgent dollar amid UK?s economic outlook on the brink of recession. The pound?s fall had been relentless throughout August, posting one of the biggest monthly losses since it crashed out of the European Exchange Rate Mechanism in late 1992. Toward mid-week, sterling clawed back some gains after the Bank of England left interest rates unchanged at 5.00 percent. However, sterling sentiment turned sour again when the sterling?s trade weighted index fell to a 12-year low pointing to the headwinds facing the UK?s economy. In addition, the expansion in the economic malaise was highlighted by the Halifax?s latest house price survey which showed that prices fell 12.7 percent.

<B> The sterling was traded at MUR. 52.15 When compared to MUR 51.91 last week.

Major data-events this week:</B>

Wednesday 10 Sep: US Redbook, Mortgage

			 GB Trade

Thursday 11 Sep: US Jobless Claims, Fed Budget

		JP deflator

Friday12 Sep: PPI, Retail Sales

Monday 15 Sep:

Tuesday 16 Sep: US Redbook, CPI, FED rate

		DE Zew

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