Weekly Currency Roundup
May 17-May 21, 2009
Local FX MarketThis week, the market was active and US dollar was stable against the Bangladesh taka. The market was mostly liquid this week.
Money Market
Overnight money market was stable this week and was moderately liquidity. The call money rate was rose slightly and settled near 4.00-5.00 percent range.
International Markets
This week saw the euro, sterling, and yen gaining ground against the US dollar, with the dollar being under broad selling pressure. The USD hit a 4½ month low against the euro, after the Federal Reserve on Wednesday cut its US economic growth forecasts and left the door open to increasing its asset purchase programme. However the sterling fell sharply against the dollar and euro on Thursday after Standard & Poor's cut its UK ratings outlook to negative from stable, which helped the dollar recover from its lowest level of the year against a basket of currencies. The pound tumbled as much as 3 cents against the dollar, retreating from a 6½ month high hit in earlier trade after the ratings agency said the UK's debt burden would rise significantly, highlighting the nation's weak fiscal position. However, sterling trimmed losses following the knee-jerk selling as some in the market reckoned that Britain is only one of many nations facing deep fiscal problems, and other countries may also be vulnerable to outlook and ratings changes. The S&P move raised the possibility that the ratings and outlooks of other countries may also come under the same scrutiny as the UK as governments around the world borrow heavily to minimise the impact of the global recession on their respective economies. Analysts at ING in London said the United States may also be vulnerable to such an adjustment, given that its debt-to-GDP ratio was worse than the UK's heading into the global financial crisis, and is expected to hit 100 percent before Britain's.
-- Standard Chartered Bank
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