MIXED sentiments were witnessed in the currency market this week, with dollar trying to regain its lost strength over the rupee. In the inter-bank forex market the dollar showed a marginal recovery amid fluctuations.
Heavy dollar-buying by big local and foreign banks to meet corporate demand on December 16, exerted pressure on rupee, which opened the week on a negative note, shedding 12 paisa for buying and 10 paisa for selling. The dollar regained its lost strength and traded at Rs58.55 and Rs58.60 versus the dollar against its previous weekend level of Rs58.43 and Rs58.45.
However, selling pressure on dollar on December 17, eased pressure on rupee slightly, which recovered 15 paisa for buying and 13 paisa for selling to trade at Rs58.40 and Rs58.43 against the dollar, its highest level during the week. The recovery proved short lived as banks demand for dollar emerged again on December 18, pushing the rupee down by 7 paisa. The dollar traded at Rs58.47 and 58.50 during the day. Bank continued dollar buying on December 19, to cover short positions. The rupee remained under slight pressure and shed 3 paisa to close at Rs58.50 and Rs58.52 against the dollar, but witnessed marginal gains in rupee value on December 20, due to dollar selling by exporters. The parity moved up slightly in favour of rupee which traded at Rs58.49 and Rs58.50 at the close of the week down 6 paisa from previous weekend close.
In kerb trading, the rupee/dollar parity did not show any major change amid marginal fluctuations. The rupee, however, opened the week on a dismal note and lost 10 paisa versus the dollar on rise in dollar demand to trade at Rs58.30 and Rs58.35 on December 16. It stayed unchanged at this level for 2 days and than revert to its previous weekend level of Rs58.20 and Rs58.30 attained on December 14, gaining 10 paisa on December 18. The rupee, however, lost 10 paisa in the last two days and revert to the opening week’s level. At the close of the week on December 20, the dollar was trading at Rs58.30 and Rs58.35, up 10 paisa from the previous weekend close.
Euro opened the week on a positive note gaining 40 paisa versus the rupee on December 16. It touched season’s high during the week at Rs59.75 and Rs60.05 on December 17, due to increased buying interest of exporters and importers. The rupee, however, managed to regain strength over the euro and gained 30 paisa on December 18 to trade at Rs59.45 and Rs59.75. It closed the week unchanged, down 25 paisa over the previous weekend close of Rs58.70 and Rs59.0.
Against other major currencies at the inter-bank forex counter, the rupee lost ground versus the British pound, the Japanese yen, the Canadian, New Zealand, Hong Kong and Singapore dollars, the Swiss franc, the Danish and Norwegian krones, the Swedish krona, the Malaysian ringgit, the Kuwaiti dinar, the Saudi and Qatari riyals and the UAE dirham. It remained unchanged against the Chinese yuan and showed strength over the Australian dollar.
In the international financial market, the dollar rose strongly against the yen on December 16, after Japan warned it would act against “rapid movements” in exchange rates, while edging up versus other currencies with the aid of rising US stocks. The familiar refrain from Tokyo, this time from the vice finance minister helped the dollar rise from a one-month low of 120.29 yen hit previous weekend.
The greenback has tumbled five yen since the sudden resignation of the US Treasury Secretary just over a week ago, throwing the long-standing US “strong dollar policy” into doubt. Worries about a possible war with Iraq also have been weighing heavily on the dollar in the last week, and dealers said such concerns also limited dollar gains after the United States and its closest ally Britain expressed dissatisfaction with Baghdad’s 12,000-page weapons declaration.
Sterling failed to extend gains having reached a one-month high against the dollar earlier as investors became reluctant to take positions ahead of the key UK data due later this week. It trimmed gains against the greenback to $1.5894 having reached a one-month high of $1.5921 earlier. Against the euro it stood at 64.27 pence, off its five-month high of 64.65 pence set last week. The dollar fell across the board earlier on fears of a US-led war with Iraq and doubts about strong dollar policy. But it later erased losses, led by its gains against the yen.
On December 17, the dollar ricocheted off a three-year low versus the euro after the White House reaffirmed its commitment to a strong dollar that lessened market uncertainty surrounding the Bush administration’s new economic team. The dollar took a beating in the Asian and European trading hours as jitters about a conflict with Iraq have been running at fever pitch since the United States and its chief ally Britain expressed dissatisfaction with Iraq’s dossier on its weapons programme prepared for the United Nations.
With a currency market grasping for straws as to where the Secretary of the Treasury-designate stands on dollar policy, a firm word on the subject amid a vacuum of information gave investors something tangible to trade off of, even though nothing new was presented. The White House spokesman said twice that the administration backs a strong dollar but added the world will have to wait until next year. The statement on a subject typically left to the Treasury department caught the market off guard.
The dollar remained weaker, however, after touching the three-year low against the euro, four-year low against the Swiss franc and a one-month low against the yen. The euro soared more than 1 per cent against the dollar to $1.0333, a new three-year high, before edging back to $1.0286, still a gain of 0.63 per cent compared with previous days New York close. The Swiss franc also gained sharply, hitting its highest level against the dollar in four years at 1.4254 francs per dollar, a loss of 1.20 percent on the day for the dollar.
The British pound vaulted to its highest against the dollar in over two and a half years as growing concern the United States was preparing for war with Iraq prompted investors to flee the greenback. Pressure on the dollar intensified on December 17 as investors adjusted positions in a thin end-of-year market.
