NEWS / Foreign Exchange

Weekly Market Review

Forex report Apr. 2-9, 2007

The dollar traded mixed at the beginning of last week, but slightly on the down side as traders were waiting for the March non-farm payrolls that were due out on April 6th.

Monday, the US manufacturing index was slightly under expectations for the month of March. The news had little impact on the dollar, that was trading in the 1.3360 area against the euro and above 1.9700 against the Sterling. However the Greenback performed better against the yen trading at 117.80. Bank of Japan's quarterly Tankan survey showed confidence among Japan's big manufacturers declined more than expected in March from December of 2006.

Tuesday the dollar hit new weekly lows against the Sterling, but performed better against the yen. Traders speculated the Bank of England might choose to surprise the markets once again by raising rates at its meeting on April 5th. At the same time the Japanese currency continued to depreciate as fresh carry trade positions entered the market.

Wednesday, the Greenback was little changed from the previous day against the European currencies. Early in the US session a report showed a slow down in the service sector for last month. Traders played cautious ahead of the unemployment report due on Friday. Volatility was limited to a 40 pip band against the euro in New York trading. The yen was down at 118.60 for a dollar, continuing a more than 24 hours downtrend.

Thursday the dollar bearish sentiment was even stronger, the euro rising as high as $1.3440 ahead of the Labor Department report. Trading volume was diminished ahead of the holiday weekend, therefore the dramatic drop for the Greenback.
The British pound dropped after the Bank of England earlier in the morning left the cost of borrowing unchanged at 5.25% for the third month in a row.

Friday the dollar received a surprise boosting from a better than expected figure in the number of jobs added in March, reinforcing speculation for a positive move by the FED in the coming months. Non farm payrolls expanded by 180,000, higher than the 168,000 projected by economists. Non farm payrolls expanded by 180,000, higher than the 168,000 projected in a survey of economists. With other markets closed for the holidays, trading volumes on Forex were lower than usual.

For the week of April 9th to the 13th we will focus on policy meeting statements from ECB and Bank of Japan. Rate differential continue to move currencies and any positive movement from the above mentioned institutions is seen as dollar negative. The FOMC minutes are scheduled to be released this week as well. Lately the economic data from the US supported very little the idea of further rate hikes by the FED. Just Friday's data came close to fueling a FED positive rate adjustment scenario. Overall sentiment on the dollar stays negative.