Last week trading on the currency market saw the dollar?s rebounding from a week of heavy selling against the euro. The dollar was bolstered after the Chicago Purchasing Management Index, a key gauge of business activity, rose to 68.0 from April?s reading of 63.9, above expectations of 61.0.

Market players who had oversold dollar on expectation of more dollar weakness scrambled to cover their short dollar positions. Earlier in the week the dollar had tumbled to multi-month lows against the euro, after US data showing stronger but below forecast US economic growth in the first quarter, sparked a sell off that ruptured technical support levels. In addition to the gross domestic product data, which market found mildly disappointing, weekly first time US jobless claims fell by less than expected. Furthermore, the greenback was hurt by concerns that persistently high oil prices could impact negatively on US economic growth.

The United States is the world?s largest consumer of energy and analysts believe that high prices could rein in US consumer spending, making the Federal Reserve reluctant to raise US interest rates. A US rate rise would boost yields on dollar-denominated assets, enhancing their appeal to foreign investors and hence demand for dollars.

USD at three weeks low

Against the Mauritian rupee, the euro was trading at MUR 34.66 as compared with MUR 34.08 a week earlier.

Over the week, the Japanese currency strengthened against the dollar. The greenback fell to a three-week low against the yen due to weak US economic data, and a rise in Japanese stock prices. The dollar also came under pressure from US investment banks buying yen before changes in the MSCI global equity indices. Morgan Stanley had earlier mentioned that its latest review would result in a one percent point rise in Japan?s weighting for standard portfolio held by US investors.

Yesterday, the Japanese currency was offered at MUR 25.96 as compared to MUR 25.13 on the previous Tuesday.

Sterling backed off from six-week highs against the dollar as strong US manufacturing data allowed the greenback to recover its footing after a weeklong slide. Earlier strong housing market and manufacturing data had given the pound broad-based support, encouraging market players to bet on another UK interest rate hike in June.

Yesterday, the pound was trading at MUR 52.14 as against MUR 50.85 last Tuesday.