Weekly Currency Roundup |
May 06-May 10, 2007
Local FX Market
The demand for US dollar was stable in the week. There was ample liquidity in the market, and the dollar fell slightly against the Bangladeshi taka this week.
Overnight money market was stable. The call money rate was range bound throughout the week and most of the deals ranged between 6.75 and 7.50 percent.
In the Treasury bill auction held on Sunday, bid for BDT 8000.00 was accepted compared to BDT 9,700.00 last week. Weighted average yield declined slightly for 28D T-bills.
International FX Market
The US dollar was under pressure throughout the week, although it receded from the record lows hit against the euro and the sterling. Strategists said that signs of slower US growth at a time when other major economies, including Eurozone and Britain, continue to show signs of expansion, is not boding a good sign for the dollar. The US Fed is expected to cut its interest rates later this year because of the economic slowdown, whereas both the European Central Bank and the Bank of England are expected to raise their interest rates.
The US non farm payroll in April grew at their slowest pace since more than 2 years, which suggested that an economic slowdown has finally caught up with the labor market. Investors are expecting that a slowing economy will eventually lead to lower US interest rates. The Federal Reserve left interest rates unchanged as expected. However, the Fed's main worry was inflation despite recent signs of economic weakness.
The recent inflation data in the UK has created expectation that the Bank of England will raise interest rates by 25 basis points to 5.5 percent, taking UK borrowing costs to the highest in the Group of Seven nations. The sterling has receded from its record highs hit in April and has slipped back below the $2 barrier.
The euro slipped backed against the dollar after its record high of $1.3680 hit on April. The ECB is expected to hold rates at 3.75 percent in its policy meeting, but is expected to signal a hike for next month. The euro receded back from the record high above 163.60 yen hit last week.
-Standard Chartered Bank