The dollar rose to fresh seven month highs against the European single currency during the past week. Growth prospects in the US contrasted with worries about the euro zone?s struggling economy. News that the US economy grew at an annual rate of 3.5 % during the first quarter increased the attractiveness of the US currency. On the other hand, the German Ifo business sentiment index fell to its lowest level in two years, further undermining sentiment against the euro. Prospects of higher US interest rates against expectations that euro zone interest rates would stagnate at current levels improved the allure of the greenback.

Expectations of a victory of the ?No? vote in the French referendum on the European Union constitution also weighed on the euro zone currency. The ?No? vote materialized, with a majority of 55 % rejecting the EU constitutional treaty, throwing doubts over the political future of the bloc. The Netherlands is now poised to vote down the EU constitution with expectations of 60 % in favour of the ?No? vote.

Against the Mauritian rupee, the euro was trading at MUR 36.56 as compared to 37.08 MUR last week. The USD, for its part, gained 3 cents and was offered at MUR 29.45 yesterday.

The Yen was trading at 108.20 per dollar yesterday at time of writing, down from the 107.60 per USD level a week earlier. The Japanese currency suffered from the broad-based rally of the US dollar amidst growing signs of sustained growth in the US.

Yesterday, the Japanese currency was offered at MUR 27.41 as compared to previous Tuesday?s 27.51.Sterling hit a low of 1.8107 USD yesterday; it was trading around the 1.8300 level a week earlier. The pound gained ground against the euro in the wake of the French referendum as investors saw the sterling as a safer place to park their investments compared to the euro. However, the British currency retreated against the rallying dollar.

Yesterday, the pound was trading at MUR 53.47 as against MUR 53.88 last Tuesday.

<B>Major data/events this week: </B>

■ <B>Wednesday 01 June</B>

Euro manufacturing, unemployment, GDP UK manufacturing US manufacturing, mortgage, Redbook

■ <B>Thursday 02 June</B>

US jobless claims, labour costs, durable goods EU Producer Price Index, ECB rate decision

■ <B> Friday 03 June </B>

US earnings, unemployment, inflation EU retail sales

<B>Contribution by HSBC</B>