July 02-July 05, 2007

Local FX Market

The US dollar/BDT market was liquid and USD lost ground against the BDT in the week. The dollar showed a downward trend against the Bangladeshi taka.

Money Market

Overnight money market was flat this week. The call money rate was range bound and most of the deals ranged between 6.50 and 6.60 percent throughout the week.

International ex market

This week saw the euro hit a record high against the yen, while the sterling again reached record 26 year highs against the US dollar. The euro held steady against the US dollar.

US Dollar

The dollar lost ground against the euro and the sterling after both the ECB and the Bank of England indicated for interest rate hikes later in the year. The Fed on the other hand is expected to keep interest rates unchanged.

Sterling

The Bank of England is expected to raise its interest rates to 5.75 percent within this week, instead of August as previously anticipated. At 5.75 percent, the BOE interest rate would be 25 basis point higher than that of the US Federal Reserve. This has given the sterling a boost against the US dollar, moving the sterling to a 26 year high against the US dollar.

Euro

The euro hit a record high of 167.30 yen, after news that the ECB will raise interest rates later in the year from its current 4 percent. The ECB is seen holding rates steady this month, but investors expect the rate to increase by September.

Yen

The yen has been hurt massively because of the current low level of interest by the Bank of Japan. Japanese rates will remain the lowest in the industrialised world even if the Bank of Japan does tighten monetary policy in the coming months. The yen still remains a very attractive currency for carry trade investors, who borrow the low yielding yen to fund their investment in other high yielding currencies.

- Standard Chartered Bank