DS: What is the outlook for major currency exchange rate and interest rate?

MR: The euro rebounded against the dollar and the yen recently, rising off recent lows after hawkish comments from a European central banker and disappointing Japanese data that fuelled selling in the yen. ECB (European Central Bank) officials are giving strong signals that markets are correct in expecting another interest rate increase next month (0.25 percent from current 3.25 percent).

EUR/USD's move back above 1.27 level has been considered significant as analysts expect euro to target 1.35 level in the long term. In the short term however, they expect the rates can go down to 1.24 level. Recent various data is showing that US economy is slowing and this may give Fed enough reason to discontinue the rate tightening cycle.

The Fed held rates steady at 5.25 percent in September. Analysts expect that unless any near future significant data would show any sign of higher inflation, Fed would not raise interest rate further and if the data continue to support the notion that the economy is slowing down, they would consider reducing interest rate gradually.

All these considerations have made analysts to expect USD to become bullish in the short term against major currencies, but bearish in the long term.

DS: What is the fuel price outlook for the next 3-4 months and where would the price go?

MR: Despite various geo-political threats, oil is expected to come down in the near future. Various technical analyses suggest that we are going to see a correction of crude price in the $ 40 level.

They argue that the supply/demand dynamics of crude oil makes the view on oil price bearish. On the current supply side picture, the August IEA (International Energy Association) monthly report shows a surplus of 0.9 million bbl/day in July.

Citigroup's Oil & Equity research team's supply and demand model suggests that inventories of crude globally represent some 53-54 days of forward supply in 3Q, 2006.

This is up about 1 percent on a year ago. So, it is important to emphasise that there is currently no oil supply shortage. Further evidence of the speculative demand in the oil market may be seen in the sharp rise in open interest positions in the oil futures. One potential source of concern about a major supply disruption from the Middle East as a result of the current impasse between the US and Iran on the latter's refusal to disband its nuclear energy programme.

While it is challenging to have a strong geo-political call, especially on the Middle East, the worsening instability of Iraq, the ending of the Lebanese conflicts and others indicating diminished US public appetite for interventionist policy all suggest a reduced possibility of a strike against Iran.

On the demand side, analysts expect a slow down of the US economy. If the US economy slows at a faster pace than consensus expectations, the demand for oil would be reduced. Oil bulls normally highlight the insatiable demand for energy from China as more than offsetting the effects of US slow down which would require an unsustainable acceleration in Chinese demand.

However, analysts discount this argument on two grounds. First, in absolute terms Chinese demand is still nowhere near as large as the US, so a marked slowdown in the latter would require an unsustainable acceleration in Chinese demand. Second, the 27 bp hike in RMB rates on August 18 underlines that the Chinese authorities themselves remain concerned about an overheating economy and are likely to continue to slow down the pace of growth.

DS: What is the outlook for major commodities like crude de-gummed soybean oil, crude palm oil, rice, sugar and steel?

MR: Views on commodities like crude de-gummed soybean oil, crude palm oil, steel, sugar and rice are by and large similar of the view of crude oil. The prices of these commodities have gone up mainly because of Chinese demand. However, as the US economy is expected to slow down and it is unlikely that the Chinese demand would accelerate enough to cover that demand, the commodity prices is expected to go down in the near future. As the prices of these commodities have increased significantly in the last two years, the global inventory has also been built enormously. This excess supply is expected to reduce prices as demand is going to be curtailed. However, in the very short term we may see some upward seasonal fluctuation in some of these commodities.