An eventful week for forex (page 2 of 2)

industrial production and a preliminary University of Michigan survey of consumer sentiment for May, will also be scrutinised for evidence of U.S. economic recovery. In the Euro Zone, preliminary first quarter GDP figures for France, Germany and Italy will be watched closely to determine the extent of recovery.

Range for the week: $1.1700 - $1.2200.

Japanese Yen

With Japan closed for the Golden week holidays, trading was limited to a narrow band during the first half of the week. Midweek saw the dollar fall to 108.33 yen, its lowest level since April 26, ahead of U.S. payroll data, but recovered after receiving support from sluggish share prices in Tokyo.

In addition, the yen was further dented after Yasuo Fukuda, chief cabinet secretary and one of Prime Minister Junichiro Koizumi's closest allies, said he was resigning because he had skipped payments into the state pension plan.

He is one of several cabinet members, including Finance Minister Sadakazu Tanigaki and Economics Minister Heizo Takenaka, who have admitted to not paying pension premiums. The Japanese currency ended the week lower after the U.S. dollar jumped to a nine-week high above 112 yen after better-than-expected U.S. employment report revealed a surprisingly high number of jobs added to payrolls in April.

Range for the week: 109.00 - 114.00

Sterling

Sterling was also trading in ranges at the beginning of the week due to May Day holiday, but jumped two cents higher, midweek, after strong data on British mortgage lending, retail sales and manufacturing sector increased hopes of a rate hike by the Bank of England. Mortgage lending rose at a record pace in March.

Furthermore, Britain's manufacturing sector also showed much strength, as the Chartered Institute of Purchasing and Supply/Reuters purchasing managers' index (PMI) rose to 55.1 in April, compared with 53.8 in March and the consensus forecast for 54.0.

Also helping the pound was higher oil prices, as Britain imports less oil than the U.S. or Europe. However, sterling soon retreated and lost ground against the U.S. dollar as markets were squaring position ahead of an interest rate hike by the Bank of England.

News that Royal Bank of Scotland, Britain's second largest bank, was buying U.S. firm Charter One Financial for $10.5 billion was weighing on the pound as traders speculated on the potential for funds to flow out of sterling into dollars.

The pound gained strength against the dollar after the Bank of England raised interest rates a quarter point, and reaffirmed expectations of gradual increase in British borrowing costs for the rest of the year.

The BoE's third hike since November took the benchmark interest rate to 4.25 percent. The Bank said it saw price pressures building despite the strength of the pound. However, sterling ended the week lower against the dollar as an unexpectedly strong U.S. employment report bolstered the greenback across the board.

After the third quarter point rate hike in Britain since November, investors, assessing whether the central bank is likely to tighten monetary policy again, will be closely watching the Bank of England's inflation report due next week.

Range for the week: $1.7600 - $1.8100.