Weekly Currency Roundup

November 1st-November 5th, 2009
International Markets
This week the dollar gained against its major rivals. The dollar and the yen gained broadly as the euro and perceived higher risk currencies succumbed to profit-taking ahead of policy decisions by the Bank of England and the European Central Bank. But the dollar and yen were expected to remain under longer-term pressure after the Fed's pledge on low US rates. Traders were wary of extending the rally in riskier assets triggered after the US Federal Reserve on Wednesday kept its commitment to low borrowing costs for an "extended period", driving the safe-haven dollar lower. The Bank of England will announce its decision with the market braced for a possible further increase in asset purchases, while a European Central Bank decision and news conference will follow. Beyond that, closely-watched US non-farm payrolls data is due on Friday and Group of 20 finance ministers meet on Friday and Saturday. Low interest rates should ensure the dollar remains a funding currency in carry trades -- transactions in which investors borrow in low-yielding currencies to buy higher-yielding assets. Analysts were divided on whether the BoE would expand its quantitative easing policy by 25 billion pounds, 50 billion pounds or call a halt to it, while keeping key interest rates unchanged at a record low of 0.5 percent. The ECB decision was seen more predictable, with the central bank expected to keep rates at a record low 1.0 percent, though market players would keep a close eye on the news conference for any clues on possible exit strategies. The dollar index, which measures the dollar's value against a basket of currencies, was up 0.2 percent at 75.811, pulling away from Wednesday's one-week low of 75.60. It hit a 14-month low of 74.94 in late October and has been in a downtrend since March.
Local Money Market
The call money rate traded around 2.5%-2.75% this week. Rates took their cue from Bangladesh Bank’s reverse repo rate.
Local Market FX
The USD strengthened against the BDT this week. The market was active and liquidity was significantly tighter than the previous week.
-- Standard Chartered Bank