On March 23, the dollar firmed against the euro because of a surprise jump in US existing-home sales. The US report, which showed sales of previously owned homes beat forecasts, eased fears about the health of the housing sector. The data also helped the dollar wipe out losses suffered earlier this week when the Federal Reserve adopted a more neutral monetary policy stance at its latest meeting, suggesting to some investors that a rate cut was imminent. The euro was trading at $1.3288, down 0.3 percent on the day. It hit a two-year high of $1.3411 on Thursday following the Fed's policy shift. The dollar last changed hands at 118.07 yen, unchanged from late Thursday, and ended the week up 1.5 percent against the Japanese currency.

On Tuesday, the euro rose against the dollar and yen after a stronger-than-expected Ifo German business climate survey. This added to expectations that the European Central Bank will raise interest rates this year. The ECB is expected to raise interest rates to 4 percent this year from the current 3.75 percent. The dollar steadied, having fallen broadly on Monday after data showed US sales of new homes fell in February to the lowest level since June 2000, reigniting concern the slowing US housing market has yet to stabilise. Investors are expecting the Fed to start cutting interest rates from the current 5.25 percent as soon as June to steer the economy into a soft landing. The euro had risen to the day's high of $1.3354, up 0.1 percent. It was also up 0.1 percent at 157.71 yen. The dollar was broadly steady at 118.14 yen. The Canadian dollar was the major gainer, rising half a percent against the dollar towards a recent three-month high.

The yen rallied and high-yielding currencies fell on Wednesday as investors became more risk averse after being rattled by a rumour of conflict between the United States and Iran. The geopolitical jitters prompted a sharp spike in the oil price and falls in equities. But despite geopolitical jitters, yield differentials point to further yen weakness given Japan's interest rates of just 0.5 percent. Nevertheless, FX investors ditched risky carry trades of borrowing cheaply in the low-yielding yen to fund purchases of higher return units such as the Australian and New Zealand dollar. Any profits from such positions can be quickly eroded by an appreciation of the funding currency. The dollar hit a one-week low at 117.10 yen, before recovering a little to stand 0.5 percent down on the day at 117.31 yen. The euro was down 0.4 percent at 156.63 yen, retreating from Tuesday's one-month high of 158.03. The high-yielding Australian and New Zealand dollars fell 0.5 and 0.7 percent versus the greenback, respectively. The euro was down 0.1 percent at $1.3334.

The yen fell across the board on Thursday, loosing ground against all the high-yielding currencies. A rise in equity markets and testimony from Federal Reserve Chairman Ben Bernanke helped soothe risk aversion. Bernanke, speaking on Wednesday, acknowledged risks to the economy from the US housing market. However he also stressed on inflationary pressures -- a message that was taken by markets to mean that the Fed is not ready to cut interest rates yet. As a result investors were prompted to re-enter risky carry trades of borrowing the low-yielding yen to fund purchases of higher return units like the Australian and New Zealand dollars, reversing Wednesday's FX market moves. Abating risk aversion knocked the yen around half a percent to around 117.38 per dollar and 156.42. The New Zealand dollar -- which enjoys the highest interest rates in the industrialised world at 7.5 percent compared to just 0.5 percent in Japan -- climbed 1 percent to 83.66 yen, erasing part of the previous day's 1.8 percent slide. The euro held steady at $1.3325. On a separate note, oil prices, which had been propelled above $68 a barrel earlier this week amid geopolitical tensions over Iran, stabilised at around $64.

-- Standard Chartered Bank