Weekly Currency Roundup
Jan 25-Jan 29, 2009
Local FX Market
This week, the market was active and US dollar was stable against the Bangladesh taka. The market was liquid throughout the week.
Overnight money market was stable this week with ample liquidity. The call money rate was steady and settled near 8.00-8.75 percent range.
This week the pound and euro strengthened against the dollar on the back of better German LFO data as well as the Barclays Plc announcement that it expects 5.3 billion pounds in profit despite 8 billion pounds in write-offs. There was also increased return of risk appetite that led to a weaker yen against the USD. The dollar and yen were broadly supported on Thursday as fading optimism over the latest US monetary and fiscal stimulus measures prompted investors to seek perceived safer assets as share prices fell. The euro remained under pressure, reversing a trend seen earlier in the week where it had benefited as concerns about the banking system and economy eased. Also weighing on the euro were comments by European Central Bank President Jean-Claude Trichet, who told CNN that the central bank could cut key euro zone rate below the current two percent as well as more unconventional measures. The euro pared some losses after data showed euro zone sentiment indexes came in somewhat higher than expected, although they were at record lows in January. Euro zone economic sentiment fell to 68.9 in January, higher than forecasts of 65.8 but still the lowest since records began in 1985. It is expected that the euro zone economy will to continue contracting. The dollar and yen have been viewed as a safe-haven currency amid the global financial crisis, and it often fluctuates depending on perceived shifts in investors' tolerance for risk. Currencies have also been closely tracking moves in equity markets, with lower share prices feeding into risk aversion. European shares were down 1.2 percent by late morning trade and US S&P futures were also down 1.3 percent after US equity markets surged on Wednesday, also in part on speculation the Obama administration would set up a so-called "bad bank" to relieve banks of toxic assets.
-Standard Chartered Bank