In Africa, at the crack of dawn, a gazelle wakes up, Knowing that it needs to outrun the fastest lion to survive.

In Africa, at the crack of dawn, a lion wakes up Knowing that it needs to outrun the slowest gazelle in order not to starve.

In Africa, at the crack of dawn, it does not matter whether you are a lion or a gazelle,You just have to run fast.

This African proverb set the stage for the game played by world economies. The US economy had to run fast in order to resist to advancing European economies. The dollar started the week full of pain due to the gloomy comments of Federal Reserve Chairman Ben Bernanke on the US economy. According to Bernanke, the ailing US housing sector would still be a protracted drag on US growth. Immediately, investors spooked away from the greenback in times when monetary policies tightening in the euro zone and in the UK were well underway. However, a sharp rise in the Institute for Supply Management?s services index for April 2006 provided some relief for the greenback. In addition, a report showed that US service sectors got plenty of juice left as it hit its highest level in over a year, putting the specter of interest rate cut lurking in the back drop. The greenback rebounded as many Wall Street firms got the stimulus to change their views on the Fed?s next move.

The greenback rally continued for most part of the week, despite the European Central Bank hiked up borrowing costs in the euro zone by 25 basis points to 4.0. Market players believed that the hike was well telegraphed but the dovish comments of ECB Chairman, Jean-Claude Trichet, cooled expectations on future hikes when he stated that liquidity remained ample and although inflation was on the upside, the ECB did not intent to change its 2008 inflation forecast. Immediately, the euro slipped, falling below the $1.3500 level.

The greenback rally gained momentum when global economic growth pushed US government debt yields above 5 percent, providing a huge window of opportunities for investors. The swooning global share prices also buoyed the dollar. The dollar ended the week on a strong note when a report stated that the US trade deficit narrowed in April reinforcing the views that the US economy was doing better than the first quarter. Against the Mauritian rupee, the dollar was trading at MUR 31.994 yesterday same as a week earlier.

The yen kept on falling and falling despite the two-year yield in Japan rose to 1.0 percent for the first time in two years in anticipation that the Bank of Japan would tighten monetary policy. Initially, the yen inched up after Asian stock markets tracked a drop in US and European stocks but later on, lost its shine as carry trades resumed. Furthermore, the Japanese currency took another blow when the Japanese machinery orders came out weaker-than-expected. Against the Mauritian rupee, the yen was trading at MUR 26.30 as compared to 26.28 same as a week earlier.

Sterling buoyed throughout most part of last week session as investors were hoping that the Bank of England would raise borrowing costs to 5.75 on its last meeting and would indicate that interest in the UK would go as high as 6 percent by the end of year. Since expectations were boiling that the BoE would be raising rates at least two times by the end of year, investors saw an attractive destination for carry trades.Robust British wage growth and a jump in customer morale, on the other hand, added salsa to placing more bets on the pound. However, sentiments for the pound soured when the BoE decided to leave interest rates in the UK intact.

Against the Mauritian rupee, the Sterling was trading at MUR 63.14 yesterday as compared to MUR 63.47 a week earlier.

<B>Vassan CALEEMOOTOO</B> Contributed by HSBC