Weekly Currency Roundup

May 04-May 08, 2008
Local FX Market
Local inter-bank FX market was tight in the beginning of the week and eased towards the end. The BDT remained almost unchanged against the US dollar.
Money Market
Overnight money market eased this week. The range moved from 10.00-15.00 percent to 8.00-10.00 percent.
In the Treasury bill auction held on Sunday, bid for BDT 9,000.00 was accepted compared to BDT 9,000.00 last week. Weighted average yield rose slightly for the 28D category T-Bills but was almost unchanged for all other categories auctioned on the day.
International Markets:
The dollar was on rise this week boosted by positive US labour market data and speculation that the Federal Reserve will not need to cut interest rates again from 2 percent. On Tuesday the dollar inched up after a surprise growth in the US service sector, but gains were minimal as investors were cautious about picking up the US currency as oil prices hit a record high. However analysts said that a jump in the Institute for Supply Management's non-manufacturing index was doing little to boost the dollar as many in the market believe that weakness in the US housing market will continue to pressure the economy. This rise continued on Wednesday, as the greenback headed towards a two-month high against a basket of currencies after a Federal Reserve official's comments added to a view that the cycle of aggressive US interest rate cuts may be ending. On the other hand, the euro was restrained by market expectations that slowing growth will spur the European Central Bank to turn more dovish on rates, this occurred after the release of some euro zone manufacturing data which showed contraction. Later in the week record high oil prices were seen reinforcing the European Central Bank's focus on inflation which underlined expectations the central bank would keep rates at 4 percent when it meets on Thursday. The euro hit a two-month low against the dollar on Thursday, hurt by a report that US and European officials want the dollar to strengthen, as markets awaited a European Central Bank rate decision and statement.
Commodities
Gold was on a rise this week initially prompted by speculation that dollar may decline, this rise continued as crude oil traded near $ 122 a barrel on Wednesday, boosting the appeal of the precious metal as a hedge against inflation. Bullion for immediate delivery gained by 0.6 percent, to $881.43 an ounce on Wednesday.
Crude oil initially rose to $116.32 a barrel, after a report showed that the US lost fewer jobs than forecast in April and as Turkey renewed its military offensive against Kurdish rebels in Iraq. Later in the week crude oil jumped to a record $123.93 a barrel on signs the US economy was improving, spurring energy demand at a time when refineries are producing less fuel ahead of the peak summer demand season.
- Standard Chartered Bank