The euro took a breather last Thursday after precipitous falls over the past few weeks as investors took note of improving signs in eurozone economic data. The single currency was also propped up on talks Japan has stepped in to conduct yen-selling, euro-buying intervention after warnings from forex chief Zembei Mizoguchi about the euro?s rapid moves. Traders said large names from Tokyo were seen placing orders during Asian sessions to sell the yen.

On the economic front, a turn-around in economic data helped assuage the euro?s wounds, following last week?s dismal reading in at least three of the largest eurozone economies ? Germany, France and Italy. Germany?s influential Ifo business sentiment index, as well as other eurozone related data came in better-than-expected, suggesting that the 12-nation bloc may be slowly stepping out of recession.

The greenback itself fell prey to profit-taking last Wednesday after better than expected durable goods and consumer confidence data failed to lift up the dollar, which some analysts took it to mean that the worst may be over for the single currency. On Friday, the greenback was yet uninspired by data which showed a rise in Midwest manufacturing activity level but a dip in the University of Michigan consumer sentiment index.

However, it should be noted that trades were light given the long US Labour Day holiday, with price movements possibly exaggerated.

Against the Mauritian rupee, the common currency was trading at MUR 32.20 as compared with MUR 31.87 a week earlier.

The yen rose to three-month highs against the dollar last week after robust Japanese industrial output data sparked a rally in the Nikkei stock average, underpinning a nascent recovery in the world?s second-largest economy. Production in Japan?s factories, mills and refineries rose 0.5 pct in July compared to June on a seasonally-adjusted basis.

While CPI data showed deflation still hit the economy for the 46th straight month, the price data showed a slowdown in the decline rate. The yen also got a boost following Japan?s announcement that it had not intervened in August to halt the yen?s rise.

Nevertheless, traders remained cautious about pushing the yen too high as the spectre of ongoing intervention lingered. Japan spent a record nine trillion yen in the first seven months in intervention, including 2.0272 trillion yen in July, to hold the yen down.

Yesterday, the Japanese currency was offered at MUR 25.27 as compared to MUR 25.08 on last Tuesday.

Sterling clambered above four month lows versus the dollar last week, buoyed by Premier Tony Blair?s testimony in the Hutton Inquiry, whilst separate interest rate comments from Bank of England?s (BOE) Paul Tucker also helped rekindle sterling interest rate differential appeal. Blair?s testimony in an enquiry into the suicide of weapons expert David Kelly helped clear some doubts regarding the Prime Minister?s supposed involvement in hyping intelligence reports to justify invading Iraq.

Analysts had feared that the inquiry could be sterling-negative if the chain of command was seen to reach as high as Blair, which would have further tarnished the government reputation.

Elsewhere, BoE member Paul Tucker warned debt-laden British consumers that interest rates would not stay low forever. The comments boosted sterling which had hitherto relied on interest rate expectations as a driver of sterling sentiment. Sterling presently offers a 1.5

percentage point pick-up over eurozone interest rates and a 2.5 per cent point pick-up over US interest rates.

Yesterday, the pound was trading at MUR 46.23 as against MUR 46.20 on last Tuesday.

Contribution by HSBC