The US dollar was seen dancing to the tune of hurricane Katrina as the latter developed into one of the fiercest storms ever seen threatening the oil facilities of the northern Gulf of Mexico. On Monday, US crude oil futures soared above the $70 a barrel and many investors fretted that such a spike would crease the US economic growth. Sky high oil prices hurt significantly the dollar in the past taken into consideration that the US continued to be the largest importer of crude oil. In addition, durable goods orders fell 4.9 percent in July from June, compared with analysts expectation of 1.2 percent decline. Orders for non-defense capital goods items excluding aircraft, often considered a proxy of overall business spending and investment, were down 3.7 percent. The woes of the US dollar felt like an oxygen balloon to the European common currency in the midst of thin summer grind. The euro started the week on a good note as the dollar slipped due to a dovish report on US orders for durable goods that made traders re-think their strategies and called back short-term bets on the US dollar. Later in that session, many traders started to probe the market for automatic stop-loss orders in the euro, expecting an acceleration in the move which would limit the bets against the European currency. As the US June orders were revised lower, a move was prompted pushing the euro thru key technical resistance levels.

The markets are now looking ahead to a batch of economic data and the expectations are that a lot of those data would be dollar positive.

Against the Mauritian rupee, the dollar was trading at MUR 29.9757 as against 29.9354last week.

<B>The Sterling drifted lower in thin summer trading</B>

The Sterling went through a tough week shedding the gains it made after the comments from the Bank of England and better-than-expected data. These robust economic indicators suggested that the Bank of England was in no rush to cut UK’s interest rates. However, the UK factory orders index showed that the UK manufacturing sector were in the doldrums for the month of August after it fell at its sharpest pace in nearly two years. This felt like a cold shower and injected a word of caution into the market. Towards the end of the week the pound drifted lower as mortgage lending data rose by only £ 6.45 billion as opposed to analysts’ expectation of £ 7.1 billion in July.

Yesterday, the pound was trading at MUR 53.85 as against MUR 53.96 last Tuesday

<B>The yen out of steam</B>

The yen skidded last week reversing gains it built on the back of Japanese share prices. The fall of the yen against the dollar continued despite data showed that Japan’s trade surplus in July was 873.6 billion yen and was better than what economists had initially forecasted. Encouraged by signs of a stronger economy foreign investors had invested massively in the Japanese stock exchange. This in turned had buoyed the Nikkei share average to a four-year high. However, the yen did not manage to hold its gain as Japanese investors had been attracted by high-yielding foreign currency denominated bonds.

Yesterday, the Japanese currency was offered at MUR 27.19 as compared to previous Tuesday’s 27.45.

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

■ <B>Wednesday 31 Aug</B>

US Mortgage Indx, GDP Prelim, Chicago Prelim

EZ GDP Q 2

■ <B>Thursday 01 Sep</B>

US jobless Claims, Cons Spending

EZ ECB rate

■ <B>Friday 02 Sep</B>

US Unemployment

EZ PPi

■ <B>Monday 05 Sep</B>

<B>Tuesday 06 Sep</B>

GB Mfg Prod

Fr. Budget Ytd

<B>Vassan CALEEMOOTOO</B>