The rupee came under slight pressure this week due to corporate demand for dollar. There was some renewed demand for dollar by some local and foreign banks during the week to meet their immediate payment obligations.

Some small investors also entered the market to make fresh dollar buying. This helped the dollar to make advances and the local currency in the interbank as well as kerb trading.

The rupee which had opened the week on a negative note on December 9, in the interbank market, made some early losses versus the dollar in the first two days and shed 9 paisa to trade at Rs58.51 and Rs58.53 on December 10, against the previous week end close of Rs58.42 and Rs58.43.

However, absence of major demand by corporate sector on December 11, together with dollar-selling by local and foreign banks helped the rupee to revert to its previous weekend position after recovering 9 paisa against the dollar. The dollar traded at Rs58.42 and Rs58.44 on December 11 for a day. On December 12, the parity remained almost stable. There were some fresh buying by local and foreign banks but there was sufficient supply of dollar, which resisted any major decline in rupee value.

On December 13, rupee gained 3 paisa amid low demand for dollar, which traded at Rs58.38 and Rs58.40, up 2 paisa versus the previous week end close.

A similar trend was observed in the rupee/dollar parity in kerb trading, whereas rupee lost 25 paisa against the dollar in the first two trading sessions of the week to trade at Rs58.25 and Rs58.35 on December 10. It, however, made two quick gains against the dollar in the following two days and recovered 10 paisa to trade at Rs58.15 and Rs58.25 on December 12. Some fresh buying by small investors emerged on December 13, which helped the dollar to recover 5 paisa. The dollar was quoted at Rs58.20 and Rs58.30 at close, up 20 paisa versus the rupee during the week.

Against the euro, the rupee made some wide fluctuations during the week. It lost 90 paisa in the first two days to trade at Rs58.70 and Rs59.0 on December 10. On December 11, the rupee recovered 25 paisa and traded at Rs58.45 and Rs58.75. At the close of the week, on December 13, the rupee was trading at Rs58.70 and Rs59.0 after shedding 10 paisa versus the euro against the overnight close of Rs58.60 and Rs58.90 on December 12. During the week as a whole, the rupee lost 90 paisa versus the euro against the previous weekend close of Rs57.80 and Rs58.10.

In the international financial market, the dollar was narrowly mixed on December 9, as markets pondered the implications of President Bush’s nomination of rail mogul John Snow to head the Treasury. Markets reacted cautiously to the nomination of Snow, a market outsider and currently chairman of rail operator CSX Corp. Snow replaces Paul O’Neil who, along with White House economic adviser Lawrence Lindsey, resigned under pressure last week. That helped send the dollar tumbling to two-week lows against the euro and Swiss franc, as investors speculated that the reshuffle may be tied to efforts to unload the strong dollar policy the Bush administration inherited.

But on December 9, the dollar was little moved and stayed well above last week’s lows, as Snow’s promise to reinvigorate the US economy and falling Wall Street stocks gave dealers little to chew on about US currency policy. In late trading, the euro drifted to $1.0096, little changed from the previous US close and well below the two-week peaks it hit on December 6 after the policy reshuffle in Washington followed grim data showing the US unemployment rate revisited an eight-year high of 6.0 per cent.

The dollar was down 0.15 per cent at 123.30 yen. The dollar set nearly six-month highs around 125.70 yen last week, only to give up more than 3-1/2 yen. The dollar rose 0.5 per cent to 1.4576 Swiss francs. Sterling was up 0.20 per cent to $1.5792.

Sterling retreated from a two-week peak against the dollar but recovered against the euro as dealers waited to see whether a new US Treasury Secretary would herald a shift in foreign exchange policy. Sterling stood at $1.5765, having flirted with a two-week high of $1.5797 in Asian trade. It was a touch firmer at 63.90 pence per euro. The pound showed little reaction to earlier data showing British manufacturers’ raw materials costs fell at their fastest rate in nearly two years in November as the cost of crude oil plummeted.

On December 10, the dollar held at modestly higher levels after the US Federal Reserve’s policy-making board surprised no one by opting to keep interest rates unchanged. The Fed unanimously decided to keep interest rates unchanged at 1.25 percent, already a 40-year low. It also said risks to the economy remain balanced between weakness and inflation, and reiterated comments made at its November meeting that the economy was going through a “soft spot”.

The euro was trading at $1.0080 in the last New York afternoon, down 0.24 per cent on the day and not far from session lows close to $1.0070. In early European trade, the euro set three-week highs at $1.0139, above peaks set after Treasury Secretary Paul O’Neil’s surprise resignation. Dealers said weak German data and rebound in the US stocks after days of losses put some pressure on the euro.

Sterling reversed early gains on news Britain recorded its worst trade deficit on record and despite a fairly upbeat report on Britain’s economy by Bank of England Governor. It lost half per cent against the dollar to trade at $1.5705, while the euro rose a third of a per cent against the pound to 64.16 pence. The dollar rose a third of a per cent to 123.74 yen just short of the 123.83 yen high reached earlier in the US afternoon. The euro was up a hair on the day, trading around 124.75 yen.

The pound showed little immediate reaction to the data, but selling momentum gathered pace as series of chart levels were broken, prompting investors who had bet on prolonged gains in the British currency to bail out. Against the euro, sterling fell a third of a percent to 64.23 pence, moving back within sight of the key 64.25/30 support. A move below this level would take sterling back to levels not seen since July.

On December 11, the dollar slipped from this week’s peak of 124.07 yen in Asian trade on growing wariness about the outlook of the US economy ahead of a series of economic indicators later in the week. Investors were also careful about going overly long for greenbacks due to lingering uncertainty about whether Washington’s new economic team would soften the strong-dollar stance. Many guessed the nominee for US Treasury secretary, John Snow, would take a hands-off approach on currencies.

The dollar drifted won on selling led by the Japanese trust banks, institutional investors and exporters. Long-holders, who built positions in early trade after seeing the dollar break through key technical levels overnight, were also forced to liquidate positions as the greenback’s advance proved short-lived. The dollar was trading near session lows at 123.24/26 yen against 123.75 in late New York. The euro was quoted at $1.0087/92 little changed from $1.0074.