Vol. 5 Num 295 Sat. March 26, 2005  

Weekly Currency Roundup
Mar 19-Mar 24, 2005
Local FX Market
US dollar was mostly steady against Bangladeshi taka in the week.

Money Market
In the Treasury bill auction held on Sunday, bid for BDT 2,464.00 million was accepted, compared with BDT 1,306.00 million in the previous week's bid. Weighted average yield of 28-D t-bill increased to 4.97 percent from 4.59 percent.

International FX Market
The dollar hit a two-week high against the euro on Monday, gaining ground on talk that the US Federal Reserve might signal a quicker pace of interest rate rises at its meeting later this week. Markets expected the Fed to raise the fed funds rate a quarter of a point to 2.75 percent on Tuesday, but the wording of the statement that would be released following the policy meeting would be the key. Some analysts expected the Fed to signal it would be more aggressive with monetary policy in coming months by no longer describing the likely pace of future rate increases as "measured". Euro lost 0.8 percent against the US dollar. The greenback also rose 0.4 percent against the yen.

The dollar hit a one-month high against the euro during the middle of the week, extending gains after the US Federal Reserve signaled it may accelerate the pace of interest rate rises to counter inflation. The US central bank raised the cost of borrowing for the seventh month in a row to 2.75 percent on Tuesday and said that "pressure on inflation have picked up" and the risks to growth and price stability would only remain balanced with appropriate policy action. The dollar also hit a new five-week high against the Swiss franc.

The dollar hit six-week high against the yen on Thursday after a surprisingly hefty rise in US consumer inflation gave traders reason to think the Federal Reserve may lift interest rates more aggressively. Dealers said data showing core US consumer prices rising at the fastest year-on-year pace since 2002, coupled with the Fed's warning on inflation earlier in the week, boosted the risk of bigger rate rises down the road. The dollar powered higher after a report on Wednesday showed the US Consumer Price Index for February rose 0.40 percent, above forecasts. Dollar also rose against both euro and sterling.

-Standard Chartered Bank