Little cheer for the US dollar (page 2 of 2)

Additionally, the Institute of Supply Management, or ISM, will report its monthly index for manufacturing activity on Friday. Economists expect the December reading at 61.0, down slightly from November's 62.8.

Although the data is expected to continue to show the economy is experiencing a strong rebound, little impact is expected on the dollar due to upcoming holidays.

Range for the week: $1.2200 - $1.2700

Yen

The yen commenced the week little changed against the dollar after Japan said it would raise the borrowing limit for its foreign exchange account, giving it more flexibility to counter a buoyant yen that officials feared could stall an export-led economic rebound.

Finance Ministry officials confirmed a widely expected move to raise the self-imposed limit to 140 trillion yen ($1,301 billion) in the fiscal year starting next April from 79 trillion yen.

The Japanese government had intervened heavily in the currency market this year to stem the rise in the yen, which this month touched its highest level of 17.8 trillion yenagainst the greenback in more than three years.

The yen didn't react much to Japanese trade data which showed that the country's trade surplus continued to bulge in November, although both exports and imports were down from a year earlier in yen terms, due in part to a higher Japanese currency.

Japan's customs-cleared trade surplus rose 11.3 percent in November from a year earlier to 990.16 billion yen ($9.18 billion), up for the fifth consecutive month. The all-industries activity index, seen as a close proxy to GDP, rose 0.8 percent in October from the previous month.

The end of the week saw the yen close a tad higher against the greenback with only intervention fears from the Japanese authorities keeping it above the 107 level.

Finance Minister Sadakazu Tanigaki, repeating his warnings against the yen's recent gains against the dollar, told a news conference that Japan would act on exchange rates if the market strayed from economic fundamentals.

The Japanese Ministry of Finance also said the Bank of Japan has agreed to a government request for short-term funding to soothe worries it may soon run out of funds to intervene in the currency market.

The BoJ policy board agreed to issue three-month repo pacts for up to 10 trillion yen, but noted that this was a temporary, precautionary measure.

Range for the week: 105.50 - 110.50

Sterling

Sterling started the week lower against the dollar mainly due to its sharp fall against the euro. The pounds underperformance was driven by year-end conversions of gilt coupons and share dividends into euro.

The currency was largely unmoved by economic data which showed upbeat growth but a disappointing current account deficit. The economy expanded faster than previously estimated in the third quarter, growing by 0.8 percent from the previous three months and by 2.1 percent against the same period last year.

Analysts had expected a growth at 0.7 percent. Despite the fastest quarterly growth since the third quarter of 2002, the current account deficit swelled to 8.1 billion pounds ($14.29 billion).

The third quarter current account deficit was the highest since the last three months of 2000 and was driven by a larger shortfall in trade in goods. However, the end of the week saw the pound rise quickly to its recent 11-year high against the greenback, mainly due the euro's rise against the dollar.

Further assisting sterling's rise was strong third quarter figures, which raised expectations that the Bank of England may raise interest rates from 3.75 percent when it meets in February, further increasing the yield advantage over the U.S.

Range for the week: $1.7500 - 1.8000