Dollar remain steady

Euro

The dollar remained steady against the single currency in thin trade at the start of the week, underpinned by its interest rate advantage and a view that the unwinding of long dollar positions ahead of the year-end has finished.

As the week progressed, the greenback tumbled marginally against the euro on a robust German consumer sentiment report. The German GfK market research group's forward-looking gauge of Germany's consumer sentiment rose more than expected to 3.8 for January after a revised 3.4 in the previous month. However, the dollar trimmed its early losses and rallied against the euro after the U.S. Conference Board said its index of consumer sentiment rose to 103.6 in December from the previous month's reading of 98.3, underscoring the strength of the U.S. economy.

Close to the final trading session of the year, U.S. sales of existing homes in November fell 1.7 pct to a 6.97 million unit rate, the first time the pace had dipped below 7 million since March, according to the National Association of Realtors. Meanwhile, the headline Chicago PMI for December came in at 61.5, exceeding economists' average forecast of 60.1. The two reports sent conflicting signals about the U.S. economy, however, the data had minimal effect on the dollar.

The market's next week big focus will be the U.S. payrolls report, which is expected to show solid growth in U.S. jobs in December. A robust job data could encourage the Fed to lift its interest rates further. On the other side of the Atlantic, market will keep a close eye on German unemployment figures, manufacturing sector survey, inflation data and services sector survey in euro zone for clues on the strength of the region's recovery.

Range for this week:
$ 1.1700 - $ 1.2000 (AED 4.2974 - AED 4.4076)

Yen

The yen slumped against the dollar and the euro at the beginning of the week as investors took advantage of higher yields abroad. Finance Ministry data showed that Japanese investors bought a net 176.8 billion yen in foreign bonds the previous week, taking the total for the year to around 15.8 trillion yen.

Meanwhile, the yen showed little reaction to a series of Japanese economic data. Japan's nationwide core consumer price index rose 0.1 pct in November comparing to the same month a year earlier. In addition, Japan's seasonally adjusted unemployment rate rose to 4.6 pct in November, above a market consensus forecast of 4.4 pct and up from 4.5 pct in October.

Range for this week:
Y 116.30 - Y 119.30 (AED 0.030788 - AED 0.031582)

Sterling

Sterling was steady at the start of the week as market in UK was closed due to Christmas holiday. As the week advanced, the pound fell against the dollar after strong U.S. data, shrugging off upbeat news on the UK property market and retail sector.

A survey from property consultant Hometrack showed that British house prices rose for the first time in 18 months in December. Sterling also showed little reaction to news that house prices in Britain rose by 0.5 pct this month, bringing the total gain in 2005 to 3 pct, the weakest full-year increase in 10 years, according to Nationwide building society.

Range for this week:
$ 1.7070 - $ 1.7370 (AED 6.2698 - AED 6.3800)