Dec 7-11,2010

International Markets:

This week marked another volatile week for currencies. The dollar's rally finally paused on Thursday as US Treasury yields retreated from a dramatic climb, prompting investors to book profits on gains in the currency.

A slide in the benchmark 10-year US Treasury yield from a six-month high hit on Wednesday quelled demand for the dollar, while moves in major currencies were subdued given a dearth of major economic data or events.

Analysts said currencies would be sensitive to US yields in the short term, but added that dollar moves have been limited during the hefty sell-off in Treasuries this week after an extension of US tax cuts fuelled fears of inflation and deteriorating US fiscal health.

Investors have become more wary of taking on big positions as liquidity dries up towards year end, which may partially explain why the dollar index has risen only 0.7 % this week as the 10 year US Treasury yields have soared roughly 30 basis points.

While the tax cuts have raised the issue of US fiscal problems, analysis say this could help to boost the economy, which would support the dollar.

The dollar index <.DXY>, which tracks the dollar's moves against a currency basket, was up a shade at 80.028, hovering near its 100-day moving average at 79.953.

The Euro which was up significantly midweek was again down to similar levels at the start of the week.

Traders say concerns over euro zone countries' debt financing while put on a back burner after euro zone bond yields fell on European Central Bank buying --could resurface at any time to hurt the euro.

Local Money Market:

Call Money rates continue to remain at very high levels, due to significant liquidity pressures.

Local Market FX:

The USD moved up against the BDT due to increased demand for the greenback in the market.

-- Standard Chartered Bank