January 14, 2002	Monday	Shawwal 29, 1422

THE RUPEE remained on rising trend against the dollar this week amid confusion over border situation. It opened the week on January 7 and unchanged appeared directionless in the absence of any major development.

On January 8, major demand for dollar came from foreign banks. However, dollar selling by exporters kept the dollar’s demand and supply in balance. Steady trend prevailed in the market with the rupee gaining 4 paisa for buying and 3 paisa for selling against the dollar. The dollar was quoted at Rs60.18 and Rs60.22 at close.

The rupee took a boost against the dollar on January 9 on improved prospects of settlement between Pakistan and India. It gained 7 paisa to trade at Rs60.11 and Rs60.15 against the dollar. On January 10, the rupee recovered another one paisa for buying and 3 paisa on selling amid slow activity. It traded at Rs60.10 and Rs60.12 versus the dollar showing lack of buying interest. Dollar selling by exporters eased the pressure on the rupee and helped it gain 5 paisa for buying and 2 paisa on selling to trade at Rs60.05 and R60.10 against the dollar on January 11. The rupee gained 17 paisa for buying and 15 paisa for selling over the week.

Against other major currencies the rupee at the inter-bank forex counter continued to show strength over British pound, euro, Canadian, New Zealand, Hong Kong and Singapore dollars, Swiss franc, Danish and Norwegian kornes, Japanese yen, Chinese yuan, Malaysian ringgit, Kuwaiti diner, Saudi and Qatari riyals and UAE dirham. It however, weakened further against Australian dollar and remained unchanged versus Swedish krona.

In the kerb, there was lack of dollar buying interest. As a result the rupee continued unchanged at R61.0 and Rs61.10 for three days after opening the week on a positive note on January 7, gaining 5 paisa for buying and 10 paisa for selling over the previous weekend close of Rs61.05 and Rs61.20. A 10 paisa gain was however, recorded on January 10, amid less buying interest, which made the dollar to trade at Rs60.90 and Rs61.0, a 15 paisa gain over the previous weekend close. The rupee closed the week unchanged on January 11. However the gap between the inter-bank rate and kerb dealing has risen from 73 paisa to 85 paisa over the week.

In the prevailing situation, the rupee is likely to maintain its present levels. Lack of dollar interest will continue in the absence of major developments on the economic front amid continued uncertainty over Indo-Pak war situation.

In the international financial market, euro strength sapped focus on the US economy and yen tumbled to new 3-year low against dollar. On January 7, the euro pulled back further against the dollar and yen in New York erasing the last of its New Year’s rally sparked by the smooth rollout of the notes and coins as investors’ focussed on promising economic prospects in the United States. The single currency had climbed against the dollar and the yen in Asian trade on news China was considering buying more euros for its foreign currency reserves.

But it executed an about-turn to shed more than half a per cent against the dollar and nearly half a per cent on the yen as investors were upbeat about prospects for a US rebound after data last week showed a slowing pace of job losses. The euro fell to 88.98 cents, a loss of 0.54 per cent compared with last week New York close. The euro started the year at 8X.X0 cents and hit a high of 90.66 cents as the rollout of notes and coins across the 12-nation euro zone last week went without a major hitch.

The euro traded at 116.72 yen, off 0.34 per cent, giving up the 2.5 per cent advance in the first week of 2002. The dollar was slightly higher against the Japanese currency at 131 after recent profit-taking brought it back from last week’s three-year high above 132 yen. The yen slide against the dollar in the fourth quarter of 2001 as Japanese officials seemed to signal a willingness to let the currency weaken to help boost the struggling economy’s exports.

The dollar managed to claw its way back from its lowest level against the yen in almost two weeks in Tokyo supported by deep pessimism over the Japanese economy. Players had helped push the yen up in post-holiday trade by locking in profits on the greenback and the euro, but selling began to wane as the focus shifted back to troubles at home. The dollar held at 130.62172 yen, having climbed back from a session low of 130.48, its worst level since December 26. It hit a three- year high above 132 yen on January 8.

The euro clung to most of the day’s gains at 89.75/80 cents, from 89.47 cents in late New York trade last week. The since currency also got a boost against the yen at 117.26/40 yen, from 117.12 in pre-weekend trade. Sterling pared most of its early losses against the euro in London but dropped back half a per cent against the dollar with analysts attributing the move to broad-based dollar strength.

Many investors are bullish about the pound because of the UK’s relatively robust economic fundamentals but acknowledge that downside risk cannot be discounted while debate about possible British entry into the euro continues, such speculation tends to weaken the pound. The pound was trading at 61.92 pence per euro and at $1.4370. The euro was down around half a per cent against the dollar, hovering around $0.8900.

The pound rose against the euro on January 8, drawing support from more data suggesting British economic growth continues to outpace the euro zone’s. The pound received support from two separate reports. Euro/sterling is a touch lower but there wasn’t much follow through, the pound was trading at 62.80 pence per euro, around a penny stronger than its lows this year set on the early EMU entry speculation after the smooth rollout of euro notes and coins. Sterling was also slightly stronger at $1.4420.

In Tokyo, the yen scurried to a fresh three-year low against the dollar after Japanese officials again appeared to give the market a green light to sell the currency. The greenback shot up to 132.75 yen by afternoon trade, well-up on late New York levels around 130.97. The dollar was also helped by the Nikkei average, which lost 2.26 per cent to 10,695.60, adding to the gloomy sentiment on Japan’s economy and rekindling talk that foreign capital may be deserting Japanese stocks. The euro also finned against the Japanese currency by more than one yen to 118.37 yen, compared with levels around 116.97 in late New York, but still some distance away from its 2-month peak, hit last week at 119.72. The euro dropped slightly against the dollar to trade around $0.8919/24 in late morning, compared with 40.8931 at the New York close.

In New York the yen took center stage on the foreign exchange markets falling to fresh three-year lows against the dollar. The yen, which has lost nearly 10 per cent against the dollar and the euro in the last two months, started to slide after Economics Minister Heizo Takenaka said the yen was not for off the level justified by economic fundamentals.

The yen was trading at 132.42 to the dollar, down more than one percent of previous days New York close. Against the euro, the Japanese currency lost more than three quarters of a per cent and was hovering around 118. The dollar picked up around a quarter of a per cent against the euro and was trading at just above $0.8900. A fall of more than two per cent in the Nikkei average also weighed on the yen, revering talk that foreign capital may be deserting Japanese stocks.

On January 9, the yen tumbled to a new three-year low against the dollar for the second straight day in Tokyo, as dealers took advantage of apparent indifference on the part of Japanese and US officials. The dollar broke through an important option level at 133 yen to touch 133.37 in morning trading. Though the yen managed to scramble back to trade around 132.62 by mid-afternoon, dealers said it remained vulnerable to a further slide.

The 10 per cent fall in the yen over the last two months gave dealers the distinct impression of United States is prepared to tolerate a weaker Japanese currency. The euro posted healthy gains against the yen in the morning, touch a high around 119 yen before pulling back on profit-taking to around 118.30 in mid-afternoon. Against the dollar, the European single currency remained lacklustre at $0.8923, little changed on late New York levels.

The pound rose against the euro in London as the dollar pushed the single currency lower across the board. The pound was up more than a half a per cent on the day against the euro, trading around 61.70 pence. Sterling was unchanged against the dollar around $1.44. Sterling was well- supported at $1.4325 but would probably find it hard to break convincingly past $1.4475.

In New York the yen clawed back from its weakest point against the dollar since October 1998 after a Japanese government spokesman voiced concern at the pace of the yen’s recent decline. Separately, the euro fell for the fifth consecutive trading session against the dollar due largely to technical factors.

In Tokyo, the yen spurted higher in Tokyo as Japanese officials, including Finance Minister surprised the market by sounding concern over the currency’s recent swift decline. The comments jolted a market that has grown familiar to near daily does of official remarks seeming to condone a weaker yen, even as the currency ploughed to new three-year lows against the dollar over the past few weeks.

The dollar hunkered at 132.02/07 yen, having shed more than a full yen from an earlier session peak at 133.24 yen. The dollar hit a high of 133.37 on January 9, a level not seen since October 1998. The yen has lost nearly 10 per cent against the dollar and the euro in the last two months on Japan’s poor economic prospects and Tokyo’s over approval of a weaker currency to fight deflation and boost the economy.