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Mauritius: Has the Dollar Hit Rock Bottom?
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L'Express (Port Louis)
23 April 2008
Posted to the web 23 April 2008
Vassan Caleemootoo
Port Louis
The greenback clawed some gains against the euro as investors felt more confident about the outlook of the US financial sector and after euro zone officials stated that the recent appreciation of the European single currency was undesirable.
The euro vaulted to historical highs, teasing the psychological highs of $1.60 before falling back after the Eurogroup head Jean-Claude Junker commented on the potential harm of such appreciation. The eurogroup, which comprises of finance ministers from 15 countries that utilize euro, believed that the strength of the European common currency would undermine the eurozone growth. In late afternoon trade, the euro receded to $1.5880 as traders were getting bold enough to place bets on the dollar.
Toward mid week, the dollar got a blow after the Philadelphia Fed's business index for April showed a sharp fall. However, investors bought back the dollar after Dallas Fed President Richard Fisher pointed out that a loose monetary policy might have inflationary risks. The Fed would be meeting on April 29-30 and market players were expecting another cut of 25 basis points in the federal benchmark rate of 2.25 to relieve a down trodden economy. This would definitely be a stark contrast to the euro zone where the European Central Bank kept interest rate unchanged at 4 percent.
At the end of the week, the dollar lost some ground as news hit the market that Citigroup Inc posted a quarterly loss of $5.1 billion and pretax write-down of $6.0 billion. According to analysts, investors were still cautious as the worst might be far from over. The US dollar traded at MUR 26.422 yesterday when compared to 26.52 last week.
Sterling got some life stuffed into it after a UK Treasury source stated that British authorities could announce of a plan to address the mortgage turmoil. The pound had experienced a 10 percent fall this year as investors were spooked by the problems in the banking sector and the global crisis in the credit market. Speculations were growing rampart that the Bank of England could allow commercial banks to temporarily swap mortgage-backed securities for government bonds to inject liquidity into the market. In addition, mortgage lenders had called on the BoE to widen collateral limits to allow them to free up their balance sheets so that they could lend more to prospective house buyers.
The market had already turned their focus to whether the BoE would cut interest rate again at it next meeting or in June.
The Sterling was traded at MUR. 52.37 When compared to MUR 52.38 last week.
The Japanese yen kept on slipping against the US currency as Citigroup's results fuelled hopes that the worst of the financial sector losses stemming out of the US housing market might be out. The dollar edged up to a seven-week high of 104.66 last Friday and according to analysts market sentiments for the yen against the US dollar would likely deteriorate.
The Japanese yen was traded at MUR. 25.65 When compared to MUR 26.20 last week.
- Major data/events this week:
- Wednesday 24 Apr: US Mortgage index
- Thursday 25 Apr: US Jobless
- EZ retail Sls
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- Friday 26 Apr:
- Monday 28 Apr:
- Tuesday 29 Apr: US Redbook
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