August 19, 2002	Monday	Jamadi-us-Saani 9, 1423

No major development was observed in the currency market, where the rupee/dollar parity remained almost stable amid minor fluctuations.

In the inter-bank market, the rupee maintained its strength over the dollar and traded in a narrow range between Rs59.55 and Rs59.56 to Rs59.49 and Rs57.52. During the week the rupee lost 8 paisa versus the dollar in three trading sessions, while gained 7 paisa in a single trading session. The parity was at its highest level at Rs59.49 and Rs59.52 on August 13, when rupee gained 7 paisa over the dollar. It was at its lowest level at Rs59.56 and Rs59.58 on the opening day (August 12). It, however, closed the week at Rs59.54 and Rs59.55, reflecting only one paisa gain over the previous weekend.

Against other major currencies, the rupee at the inter-bank forex counter, displayed weakness during the week and lost ground versus the British pound, the Canadian, Australian, New Zealand and Singapore dollars, the Swiss francs, the Japanese yen, the Danish and Norwegian krones, the Swedish krona, the Japanese yen and the Kuwaiti dinar. It, however, managed to hold ground versus the Chinese yuan, the Hong Kong dollar, the Malaysian ringgit, the Saudi and Qatari riyal and the UAE dirham.

In kerb, the rupee/dollar parity moved in a narrow range. During the week the rupee lost 5 paisa against the dollar. However due to balanced demand and supply of dollar, the parity was almost stable at Rs59.45 and Rs59.55 during the most part of the week. Euro on the other hand was able to recapture lost ground versus the rupee last week. Fresh buying in euros was noticed in the kerb, where rising demand for the single European currency pushed rupee down from Rs57.70 and Rs57.90 on August 12 to Rs58.25 and Rs58.50 at the close of the week. Thus rupee lost 90 paisa versus euro over the previous weekend close, when the euro was trading at Rs57.35 and Rs57.55 during the most part of the week.

On the international front, the dollar fell sharply against the euro and yen on August 12 in New York, a day ahead of the Federal Reserve’s policy meeting, under pressure from the sagging Wall Street stocks and fading hopes of a US interest rate cut. Dealers said the dollar’s fall gained momentum in Tokyo after triggering several stops around 119.70-119.80 yen, which drove down the currency to a one-week low of 119.66 yen. But there were plenty of investors’ bids around 119.30-119.50 yen.

The US currency tumbled more than 1 per cent against other major currencies before paring its losses slightly. It ended the US session at 119.20 yen, down 0.90 per cent, while the euro finished at 97.83 cents, up 0.92 per cent. The dollar was backtracking from last week’s 1-1/2 month peaks, reached as the Wall Street stocks had rebounded from five-year lows struck in July and expectations had mounted for a US rate cut.

Usually lower rates hurt a currency, but the dollar had benefited against other major currencies on hopes that a rate cut would revive the US economy. The euro rose to 97.41 cents against the previous week’s 96.94 cents.

The single currency also made gains to 116.85 yen from 116.52 late last week end in New York. Sterling rose against the dollar but fell back against the euro as it could not match the single currency’s gains against the broadly weaker greenback. Sterling was trading at $1.5287, a third of a per cent up on the day and nearly a cent up from a one-month low hit last week. But the pound was nearly half a per cent lower against the euro at 63.88 pence.

On August 13, the dollar struggled against the yen and euro in Asia as sentiment was depressed again by a weak performance on the Wall Street and fading expectations of a Federal Reserve interest rate cut. The greenback fell to a one-week low of 118.74 yen, but trading was thin with many Japanese investors taking their traditional “Oboe” summer holidays this week.

Many players a” hesitated to take new positions as they waited -for the outcome of the US Federal Open Market Committee’s decision on rates. Most interest was focused on the central bank’s assessment of the economy and whether it would change its bias on the direction of interest rates. The dollar was quoted at 118.81/84 yen against a late US level of 119.05/10. The euro was quoted at 97.84/86 cents against 97.87/92. The single currency was at 116.23/32 yen compared with l 16.57 in late US trade.

Sterling was little changed against the dollar and the euro as dealers brushed aside a big jump in British inflation and waited for the outcome of the US Federal Reserve’s interest rate meeting. Sterling was trading at $1.5307, around a cent above a one-month low hit last week. It was at around 63.83 pence to the euro after earlier hitting 64.02, its weakest showing since July 22.

On August 14, the yen roared higher against the dollar and euro, sparking market concerns about intervention risks, but its gains were tempered when the dollar rebounded in tandem with the surging US stocks. The Japanese currency’s rally had been kicked off by the Federal Reserve’s warning that the US economic risks were tilted toward further weakness. The statement combined with the Fed’s decision to hold interest rates steady, inspired a sell off in stocks and the dollar.

As the yen extended its gains during Asian and European trading, it crashed through key chart levels against the dollar, euro and other currencies, triggering even more buying of the Japanese currency. The dollar traded at 117.33 yen, down around 0.87 per cent from the prior day’s close, but well off the session’s three-week low at 116.32 yen. The euro stood at 114.91 yen, off 1.37 per cent on the day and in view of the session’s near three-month low of 1.14.62 yen.

The British pound rose to its highest level against the dollar in over a week as worries over the US economy resurfaced after the Federal Reserve signalled conditions could get worse. Sterling pushed to highs above $1.5465 in late European trade, bringing its gains to more than two cents since the start of the week. The pound was a touch firmer at 63.85 pence per euro, having recovered from an earlier dip to a three-week low.

On August 15, the dollar posted mild gains against the yen in Asia as strong gains on the Wall Skeet forced players to buy it back after heavily selling in the previous session. Players who sold heavily after the US Federal Reserve decided to leave interest rates steady were buying back the greenback after the US shares soared.

Some dealers who had also sold dollars earlier tin the session, betting that the Japanese repatriation of the US Treasury coupon payments would pressure the greenback, were forced to buy back after seeing hardly any such flows.

Active dollar buying came from trust banks on behalf of public and pension funds. The dollar stood at 117.46 yen compared with 11.7.34/39 yen in kite US trade. It fell to a three-week low of 116.30 in New York. The euro inched down to 97.73 cents, compared with 97.92 in the US trade, and to 1.14.77 yen from 1.14.93. With no events due until next week, sterling, fell back from previous day’s one-week high against the dollar as a positive Wall street opening underpinned the greenback across the board was trapped between movements in the dollar and the euro.

At the close of the week on August 16, the dollar advanced in Asia after the Wall Street share prices edged up, but simmering concerns about the US economy capped its progress. The dollar lifted to an intraday high of 1.17.75 yen in the morning, it became locked in tight ranges, with many traders on the sidelines due to the summer holidays and a looming series of the US economic data.

The greenback was quoted at 117.59/62 yen against 117.18/26 in the late US trade, continuing its rebound from a three-week low of 116.30 hit in the US trade on August 14.

The euro eased to 98.01/11 cents compared with 98.20/25 cents in the US trade. Sterling stood at $1.5355 virtually unchanged from - the previous New York close. Against the euro, sterling was down a quarter-per cent at 64.08 pence, moving back within sight of previous day’s three-week low of 64.20.

Sterling retained a weak bias against the euro moving back within sight of recent three-week lows, as bearish sentiment towards the British currency continued after a spate of disappointing data. But the pour d hugged a tight range against the dollar as the Wall Street stocks pared some of their recent gains after data showed the US consumer confidence remained fragile. With no domestic news to give direction.