February 4, 2002	Monday	Ziqa’ad 20, 1422

THE INTER-BANK market experienced sluggish activity this week with the rupee showing a firm trend versus the dollar. The dollar remained under selling pressure throughout the week.

On January 28, the rupee opened the week on a fine note and traded at Rs60.22 and Rs60.25 against the dollar after closing at Rs60.22 and Rs60.24 in the previous week. Though slight activity was noticed on January 29, but the rupee remained firm amid fluctuations. It dipped 3 paisa for buying and 2 paisa for selling over the overnight level to trade at Rs60.25 and Rs60.27 versus the dollar.

With persistent low demand for dollar, the rupee managed to hold its firmness. It did not show any change over its previous level and continued to trade at Rs60.25 and Rs60.27 on January 30. It however, gained 5 paisa for buying and 4 paisa for selling on January 31, to trade at Rs60.20 and Rs60.23. finally it ended the week unchanged trading at its previous day’s level. The rupee showed a marginal appreciation of 2 paisa for buying and one paisa for selling during the whole week.

Against other major currencies, the rupee at the inter-bank forex counter lost ground versus British pound, Canadian dollar, Japanese yen, and Swedish krona. However it recovered ground versus Australian, New Zealand, Hong Kong and Singapore dollars, Norwegian and Danish krones, Swiss franc, Chinese yuan, Malaysia ringgit, Saudi and Qatari riyal, the UAE dirham and Kuwaiti dinar.

Balanced demand supply for dollar in the kerb kept the rupee/dollar parity intact through out the week. The rupee traded unchanged for two days at Rs60.70 and Rs60.80. Low dollar demand and is sufficient supply in the absence of moving factors pulled the rupee further in the following two days. The parity gained 20-paisa on January 30 to trade at Rs60.50 and Rs60.603 another 10 paisa raise on January 31 made the rupee to trade at Rs60.40 and Rs60.50 against the dollar. At the close of the week the rupee recovered another 10 paisa against the dollar, which traded at Rs60.30 and Rs60.40 on February 1, depicting 50 paisa appreciation over the previous weekend. The gap between the inter-bank and open market rates narrowed further to 10 paisa for buying and 17 paisa for selling. Low demand for the dollar is likely to persist. While dollar selling pressure will continued. Consequently, the current trend in rupee/dollar is likely to persist, amid modest fluctuations. No major development is expected in the near future. Over the past 12 months, the rupee showed a depreciation of 91 paisa in the inter-bank market but appreciation of Rs1.70 in the kerb. The gap between the two rates was to the tune of Rs1.75 a year ago, when the dollar was trading at Rs59.30 in the inter-bank and at Rs62.05 for buying in the kerb.

On the international front, the euro will steadily gained ground against the dollar this year in spite of a recent tumble to six-month lows. The euro broke below a key technical level last week and fell further to six-month lows below 86 cents on January 28. Salomon analysts expect Europe’s single currency will climb back to the 90-cent level within the next month, rise to 92 cents in three months and reach 93 cents in the next six months. The euro should reach 96 cents in a year.

In Tokyo, the dollar held an upper hand against the euro on January 28 on optimism about the US economy, but staged a rare retreat on the yen as a result due to falls in the euro-yen cross. Having stumbled to 133.61 yen after another stab at a three-year high of 134.95 yen earlier, the greenback wavered at 133.72/75 yen.

Holding the dollar back was a mass unwinding of long euro/yen positions, which saw the single currency sink to a new low for the year at 115.41/52, having already shed over two-last week to 116.32 Against the dollar, the euro struggled at $0.8640/44, having slumped more than a cent to a six-month low near $0.8630.

In London, sterling rose to a one-month high against the euro as the single currency fed sharply against the dollar. But the dollar’s rally pushed the pound, at one point, down to fresh two-month lows against it before sterling managed to recoup most of its losses. The pound was trading at $1.4095 after hitting lows below $1.4050 earlier in the session. Against the euro, it fetched 61 pence, its highest level in month.

On January 29, the dollar was broadly weaker in New York weighed down by sharp losses on Wall Street. The big euro, yen buying was primarily because of Tyco and Williams, the two companies on the new York Stock Exchange that are really selling off because of worries about accounting practices. Europe’s single currency was the biggest gainer on the day, but analysts were reluctant to read too much into the euro’s modest gains.

In late US trading, the euro traded near session highs above 86.55 cents, up 0.30 per cent on the day and nearly a full cent above previous day’s lows. The euro was also a notch firmer against the yen, trading around 115.25 yen. The dollar also slipped against the yen, trading around 133.25 yen not far from the session lows and well below last week’s three year highs near 135 yen.

In Tokyo, the yen extended gains against the dollar in choppy trade but dealers said the bounce was largely due to position adjustments and did not reflect any change in Japan’s economic fundamentals. The dotter got bullish against the yen and most European currencies, after Federal Reserve Chairman Allen Greenspan appeared optimistic on the US economy. Subsequent profit-taking in the dollar helped the yen against most currencies.

The dotter dipped to a low of 132.95 yen, down from its late New York level of 133.52 before steadying at 133.15/18 yen. The euro was at 114.58/71, sticking near its one month trough. The euro kept its bearish tone against the dollar at $0.8603/06, having managed a modest bounce to around $0.8635 from a fresh six-month trough of $0.8572 offshore.

Sterling ended in London little changed, trapped between the fortunes of the dollar and the euro in the absence of domestic news to give the currency fresh direction. The pound remained only around halt a cent above two-month lows set against the dollar set and just off one-month lows against he euro, as sterling remained trapped between the two major currencies. Support for sterling at $1.4050 had held up fairly well but resistance against the euro at 61 pence was also proving difficult to crack convincingly. Sterling was trading at $21.4102 and 61.02 pence per euro.

On January 30, sterling shed early gains against the dollar in London after the positive impact from upbeat UK consumer data was offset by a surprise upturn in the US growth. Sterling stood at $1.4125, off its day’s high around $1.4180 to stand unchanged from levels in late New York. Against a generally weaker euro it gained a quarter of a percent to 61.04 pence from 61.18.

The dollar lost a full yen to hang at one-week lows in Tokyo hurt in part by a report in the Wall Skeet Journal that the US car giant General Motors was lobbying Washington to take steps against the weak yen. The dollar fell to its lowest in a week at 132.65 yen from an earlier high at 133.66 yen. It sat at 132.75/78 yen in subdued mood awaiting a decision from the US Federal Reserve’s policy-setting meeting later in the day.

It was largely unchanged against major currencies in New York immediately following the US Federal Reserve’s largely expected decision to keep its benchmark interest rate steady at 1.75 per cent. Immediately following the Fed’s decision, the dollar traded around 86.20 cents against the euro, and bought 132.70 yen.

On January 31, the dollar put in a steady but uninspiring performance in Tokyo with the market strangely reserved despite signs a long-awaited US recovery. On the face of it, dollar bulls should be partying. But while that helped pull the euro off a $0.8674 high the dollar could not extend its gains and stood at $0.8625 in late Tokyo from $0.8614 in New York. Against the yen it drifted to 132.84 from an early 133.22 top, leaning it unchanged on the day.

In London, sterling held steady against the dollar with sentiment underpinned by data which showed resilient British consumer demand despite a global downturn. But the pound wiped out gains versus the euro to come off its one-month high hit earlier, succumbing to profit-taking pressure and some commercial selling by European banks. Sterling trimmed early losses to stand nearly unchanged on the day at $1.4134.

The dollar firmed in New York and pushed to session highs against the yen while holding steady against the euro as a view the US economy is recovering from recession continued to gain steam. The US Labour Department reported weekly jobless claims rose by 30,000 to a seasonally adjusted 390,000, while the four-week moving average fell to 386,000, the lowest level since August 18, 2001.

The news helped pushed the dollar into the plus column against the euro which fell to 86.10 cents against the greenback, a loss of 0.10 per cent compared with previous day’s New York close, and within striking distance of its six-month low of 85.67 cents. The dollar hit a fresh high for the day against the yen, touching 133.61 yen, a gain of more than 0.50 per cent. The dollar’s move breaks a four-day losing streak. The euro also rose against the yen, reaching a session high of 115.09 yen, a gain of roughly 0.55 per cent.

At the close of the week on February 1, the yen was under siege in Tokyo after to three-year lows against the dollar and the speed of the slide drew calls for calm from Japanese officials finance minister cautioned that the dollar’s two-yen rise was too rapid while a senior MOF official said sudden moves were undesirable.