Last week saw the dollar barging higher against the major currencies in a technically driven rally bolstered by hawkish comments made by the US Treasury secretary, John Snow. According to John Snow, the United States is going forward with a strong dollar policy including slashing the deficit to support the currency?s strength. Even though the December non-farm payroll?s growth was below economists? expectations, the market still believed that the Federal Reserve would continue to be on track to keep hiking up the interest rates.

<B>Fresh air</B>

The United States generated 157,000 jobs in December compared to a forecast amount of 175,000. In addition, payroll growth for the months of November and October was revised higher to 137,000 and 312,000 respectively.

Against the Mauritian rupee, the dollar was trading at MUR 28.60 yesterday compared to MUR 28.52 a week earlier.

The pound wobbled as bearish economic indicators gave clues that UK?s interest rates might have peaked. For December the CIPS/NTC index of service sector business fell to 54.9 from 56.7 in November as orders grew moderately. In addition, the office of National Statistics announced that non-seasonal adjusted prices fell 1,4 percent in December after a 0,1 percent gain in November. However, the British housing market gave the pound a breath of fresh air. Data from one of the biggest British mortgage lender showed house prices rising 1,1 percent in December, giving some relief to Sterling investors fearing a softening housing market.

Against the Mauritian rupee, the Sterling was trading at MUR 53,82 yesterday as compared with MUR 54,43 aweek earlier.

<B>Capital inflows</B>

Last week the yen firmed against the dollar as fresh capital inflows were noted in the Japanese stock market. However, traders believed that the dollar/yen trading wold be supported by stop-loss orders lined up around 103.75 yen and resistance was building around the 105 yen.

Against the Mauritian rupee, the yen was trading at MUR 27.59 as compared wth MUR 27.92 a week earlier.

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

■Wednesday 12 Jan

US Mortgage indx, Fed Budget

GB Trade bal?cc

■ Thursday 13 Jan

GB Ind Prod, BoE rate

US jobless claims, Retail Sls

■ Friday 14 Jan

US PPI

■ Monday 17 Jan

■ Tuesday 18 Jan

GBP CPI

<B>Contribution by HSBC</B>