The Australian dollar retained a firm tone over the week and tested levels above the 0.92 level against the US dollar as US confidence weakened.
The Reserve Bank's minutes from February's meeting were generally hawkish with a suggestion that a 0.50% rate increase was considered at the meeting due to inflation concerns. Reserve Bank officials also took a generally tough stance on inflation and monetary policy during the week.
The Australian currency drew support from the strength of metals prices during the week, especially the gains in industrial metals prices.
The domestic releases were limited with annual wage growth of 4.2% for the fourth quarter which failed to have a significant impact.
The yield differential will remain compelling in the short-term, although there will still be strong barriers to gains given the global growth fears
Canadian dollar:
The Canadian dollar dipped to lows around 1.02 against the US dollar before securing some respite as the US currency was subjected to fresh selling pressure.
The wholesale sales data was significantly weaker than expected with a 2.9% annual decline for December.
The headline consumer inflation rate was 2.2% for January. Core prices rose 0.1% over the month with the annual rate declining to 1.4% which was the lowest rate for 30 months. The low rate maintained expectations of a further cut in interest rates.
The Canadian currency drew some support from high oil and commodity prices, although the economic uncertainties tended to dominate.
The net risks still point a weaker Canadian dollar as domestic economic fears increase, although heavy losses should be resisted in the current environment.
Indian rupee:
The rupee continued to weaken over the first half of the week and dipped to a five-month low of 40.25 against the US currency. The rupee reclaimed the 40.0 level later in the week, but still had a generally weaker trend.
A significant dollar shortage developed in the market which boosted the US currency, although stresses eased over the second half of the week The rupee was undermined by doubts over capital account trends, although the overall evidence did not suggest that there had been sizeable outflows..
The rupee was undermined by the high level of oil prices in the market with crude prices again challenging the US$100 per barrel level.
Fears over the global economy and a more cautious investment stance will maintain rupee vulnerability. Heavy losses should be avoided given improved yield spreads.