Weekly Currency Roundup

January 13-January 17, 2008

Local FX Market
The US dollar/BDT market was a tight this week, fueled by ample demand for customer payments. The USD/BDT rate however was ranger bound.
Money Market
Overnight money market was tight this week and the rates showed a steady uptrend throughout the week.
International Markets
The dollar started off the week on the back foot, reaching within few ticks of the record low of $1.4969 against the euro. The Federal Reserve is widely expected to cut interest rates in its next meeting to prevent the ailing US economy from going into recession. The condition of US dollar was also not helped when Citigroup, the world's largest bank, announced that it will write off $9.8 billion in its last quarter because of bad-debts related to subprime mortgage. The total write-off Citigroup now stands around $20 billion.
In contrary to the US dollar, the yen reached a 2 year high against the dollar because more and more investors were squaring their carry trade positions on fear of weakening dollar and bad performance in the world stock markets. Carry trade involves borrowing low interest bearing currencies such as the yen, and investing it in higher yielding assets. The dollar also hit record lows against the Swiss franc this week.
However, near the end of the week, the dollar recovered some grounds against the euro, after comments from a Eurozone policymaker fuelled fears that US economic weakness may be spreading to Europe. But analysts said the dollar would probably struggle to progress much further due to expectations for at least a half point interest rate cut by the Federal Reserve this month to stimulate the sagging economy.
-Standard Chartered Bank