Forex: Weekly review
28.03.2011, 05:51

Forex: Weekly review

The euro rose to a four-and-a-half-month high against the dollar this week, shrugging off worries over the fiscal health of the eurozone’s peripheral countries.
The single currency remained resilient in spite of two Portuguese government debt downgrades and the resignation of José Sócrates, Portuguese prime minister, after he failed to get parliamentary approval for his plans to rein in the country’s fiscal deficit.
Analysts said expectations of monetary tightening from the European Central Bank next month were continuing to support the euro with traders noting buying interest from Asian reserve managers on any dip in the single currency.
In addition, they said a potential bail-out of Portugal by its eurozone partners had already been priced in by investors.
The euro, which hit an 18-week peak of $1.4249 against the dollar on Tuesday, eased just 0.2 per cent to $1.4147 over the week.
Meanwhile, the Australian dollar hit a 29-year high against the US dollar, rising 3.2 per cent to $1.0280 as recovering risk appetite fuelled demand for the commodity-linked currency. This means that it has more than recovered all of its sharp losses after the earthquake and resulting nuclear crisis in Japan this month, which raised fears over global growth.
Analysts said last week’s co-ordinated action from major central banks to weaken the yen had improved investor sentiment, helping to allay fears that a disorderly rise in the currency would destabilise not just Japan’s economy and financial system, but that of the whole world.
Other commodity-linked currencies advanced with the New Zealand dollar up 3.5 per cent to $0.7564 against the dollar on the week and the Canadian dollar 0.9 per cent higher at C$0.9757.
The yen continued to weaken after last week’s intervention, falling 0.6 per cent to Y81.10 against the dollar on the week.
The dollar advanced elsewhere, climbing 1 per cent to $1.6072 against the pound over the week and rising 1.6 per cent to SFr0.9149 against the Swiss franc.

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