The greenback had quite a bright week as it rose to an almost one-month high against the euro, buoyed by growing views that the Federal Reserve was ready to signal a stop to its rate-cutting spree.

The market had already factored in a 25 basis point cut by the FED, bringing down overnight borrowing rate from 2.25 percent to 2.00, before the Federal Market Committee started its two-day meeting. However, market analysts were satisfied in finding clues that the FED would be ready to pause the easing cycle especially with swelling inflationary pressures in the backdrop. Since mid-September the US central bank had slashed fed funds rate by 3.25 percent to salvage an economy that had been battered by housing market downturn in the wake of subprime mortgage crisis. Those cut had undermined the allure of dollar-denominated assets and caused a flight of capital into other high-yielding currencies.

In mid-week, slightly stronger-than-expected US manufacturing and consumer spending data sent the greenback surging to a seven-week high. The New York Board of Trade?s dollar index, that tracked the dollar?s performance against a basket of major currencies, vaulted to 73.393 as compared to 73.274.

On the other hand, expectations appeared to be rising that the European Central Bank might be going for a rate cut. A batch of poor euro zone economic data raised doubts on the ability for the ECB to continue its tough stance on inflation. Data showed that French consumer confidence fell to its lowest level since 1987. Besides, Spanish calendar-adjusted retail sales fell to a record 5.5 percent. This pushed traders to cover short dollar positions causing the euro to drop to $1.5565 in late New York trading session.

The US dollar traded at MUR 26.932 as compared to MUR 26.422 as last week.

Sterling had a rough week, falling prey to the rallying greenback after data showed rising US inflation pressures could slow the pace of further monetary tightening. However, the pound?s fall was limited when a Bank of England?s report suggested that the global credit crunch might be exaggerated. With liquidity very thin due to holidays in the UK, Sterling had been very volatile and even got a jolt from a rise in banking shares and general improvement in risk appetite.

The Sterling was traded at MUR. 52.94 When compared to MUR 52.38 last week.

The Japanese yen remained muted throughout most of last week trading. In fact the yen fell to a two-month low against the greenback at 104.83. That was definitely a big fall from 95.77 in mid-March. Market players noted that Japanese investors bought the US dollar against the yen. In the later part of the week, investors shrugged off a slew of Japanese economic data that showed industrial output falling in March as compared to the previous month.

The Japanese yen was traded at MUR. 26.06 When compared to MUR 25.61 last week.

Vassan CALEEMOOTOO

HSBC Mauritius Treasury and Capital Markets