CURRENCY MARKET REPORT

Dated 4th Dec 2008, Madan Sharma,

Summary: - Mr. Obama’s selection of an economic team reflects in some ways what might be expected to come. Most in the team are strong dollar policy supporters. The team is very experienced and qualified to handle the recession at hand. Two situations happening in different times are never an exact repeat and the second time around more tools are always available for handling the crisis. In my opinion with the new initiatives proposed or being considered will comfortably stir the US economy back to a growth path, however the time frame cannot be guessed. Technically speaking I see no sign of a USD reversal for now. USD will remain strong for now. With new measures being proposed other then only fiscal measures, I am once again optimistic on the US economy.

Many parallels are being drawn between 1929 and now, and also between the recession in Japan in the 1990’s & now. However these are not identical situations and tools are available to handle the current recession
With the new measures proposed like to embark on an ambitious infrastructure and reconstruction plan is a very good sign and will considerably boost the economy.
Tomorrow being the first Friday of the month we have unemployment and Non Farm Payrolls data. First inflationary data of the month.

Today’s BOE meeting is expected to cut UK interest rates further. The ECB is also expected to bring interest rates lower. Hence the USD is likely to remain strong.
Gold: Gold is holding pretty well. It’s still around its highs of 2008. Gold remains bullish.
Oil: Will drop further and is likely to come down to 30 USD a barrel.
GBP: - Is the weakest among all currencies and is likely to drop to 1.4 and then to 1.3 against the USD. If some concrete measures are not announced to revive the economy we might even see the GBP going lower then 1.3
JPY: - remains strong but one need to be careful once it reaches 90 levels as it might bounce to around 95.
USD/PLN: Likely to go to 3.20/3.30 for now.