April 7, 2003	Monday	Safar 4, 1424

Slackness in trading activity at the inter-bank market continued in the wake of rising tension in the Gulf this week, but the rupee managed to hold its firmness over the dollar. In the inter-bank market, it commenced the week unchanged at previous weekend close of Rs57.85 and Rs57.86.

The dollar remained under selling pressure throughout the week under review, which helped the rupee to gain 10 paisa against the dollar in the entire week. The rupee, at the end of the week on April 5, was trading at Rs57.75 and Rs57.78 in the inter-bank market.

The rupee also gained against the dollar in the kerb recovering 10 paisa in the first three days of trading amid slow business. On April 2, the rupee-dollar parity was trading at Rs57.75 and Rs57.80 against the previous weekend close of Rs57.85 and Rs57.90. However, dollar-buying pressure emerged on April 3, after it gained some ground in the international market, pushing the local currency down in the kerb. The rupee lost 10 paisa against the dollar on April 3 and traded at Rs57.85 and Rs57.90. It extended further loss of 5 paisa on April 4 closing the week at Rs57.90 and Rs57.95, which reflected a cumulative decline of 5 paisa over the previous weekend close of Rs57.85 and Rs57.90.

Euro continued to maintain its strength over the rupee. It commenced the week on a negative note, shedding 70 paisa on March 31 to trade at Rs62.70 and Rs63.0. However, the European currency came under heavy selling pressure on April 2 due to its falling value in the world and lost 110 paisa against the rupee in the following two days, trading at Rs61.60 and Rs61.90, the week’s lowest level on April 3. Finally the parity ended the week at Rs61.72 and Rs62.0 on April 4 with the rupee shedding 12 paisa versus the euro but still up 30 paisa against the Euro compared to previous weekend close of Rs62.00 and Rs62.30.

Against other major currencies at the inter-bank counter, the rupee strengthen against Canadian, Australian, New Zealand and Singapore dollars, Swiss franc, British pound, Japanese yen, Danish krone, Swedish krona, Chinese yuan, Malaysian ringgit, Kuwaiti dinar, Saudi and Qatari riyals, and UAE dirham.

On the international front the dollar fell to its deepest trough in two weeks against major currencies on March 31, with the market unsettled by the increasing likelihood of a protracted war against Iraq.

The euro scaled to new two-week highs at $1.0919, but trimmed those losses to stand near $1.09 in US trading, four cents above the two-month low it hit at the start of the conflict and up more a full per cent from its previous US close. The dollar bought 1.3525 Swiss francs, also down more than one per cent on the day and at a two-week low. The US currency was hammered to a new two-week floor below 118 yen, off 1.50 per cent on the day.

Sterling fell nearly half a penny against the euro close to three-week lows as it slid in solidarity with the dollar on market worries over the prospects of a prolonged war in Iraq. The pound had weakened as far as 69.01 pence per euro, its worst showing since March 11. However, against the dollar, it rose as high as $1.5818 — its highest since March 17, before the Iraq war started. On April 1, the dollar rose modestly after several days of losses as traders got used to the idea that the war in Iraq may drag on for a while.

In New York, the dollar was trading up about a tenth of a per cent against the euro at $1.0909 per euro off the day’s highs of $1.0867. Against the Swiss franc, the dollar was up 0.30 per cent at 1.3535 francs. Sterling was off 0.32 per cent at $1.5778. The euro zone purchasing manager’s index fell to 48.4 in March from 50.1 in February lower than forecast. In late New York trading, the dollar was up 0.3 per cent against the yen at 117.97 yen. The pound slid to a three-week low of 69.22 pence per euro in London afternoon trade — approaching a four-year low of 69.27 hit in early March.

The British currency also turned tail from the previous session’s two-week peak against the dollar, shedding half a per cent to $1.5750. Sterling has fallen more than six per cent against the euro and two per cent against the dollar since the start of the year.

On April 2, the dollar soared as the advance of US-led forces towards Baghdad raised speculation the war against Iraq was starting to progress more rapidly. It rose about one and a third per cent against the euro and almost 2 per cent against the safe-haven Swiss franc, more than erasing the losses suffered at the start of this week when the concern was that the war might drag on.

In late New York trading, the dollar was at $1.0764 per euro having flown through key technical levels at $1.0800 and $1.0780. The dollar rose 0.77 per cent to 118.92 yen. The dollar was aided against the yen by concerns over further yen-selling intervention by the bank of Japan after Finance Minister said Japanese authorities were ready to back up their verbal warnings against currency fluctuations with action. The pound rose half a per cent to a high of 68.75 pence per euro, having fallen as low of 69.30 in New York session on March 1 — its lowest level since February 1999. Reports that the US forces had encircled the city of Karbala gave both currencies a boost with an ebullient dollar rising almost one per cent against the euro and yen — and pushing sterling back to $1.5700.

On April 3, the dollar edged higher as the US-led forces closed in on Baghdad but gains were tempered by weak US economic data and falling share prices.

In New York, the euro was trading at $1.0765, down about a tenth of a per cent on the day but well off its lows of $1.0687 touched in overnight trade. Against the yen, the dollar rallied 0.34 per cent to 119.47 yen.

Sterling matched the greenback’s gains on the euro, climbing half a per cent to 68.34 pence per euro hauling itself further off a four-year low beyond 69 pence set earlier in the week. It recovered from a half per cent fall earlier in the day to stand slightly firmer at $1.5693, having dipped below $1.5600 earlier. The dollar seems to be slipping back a little bit at the moment so the pound is getting a bit of a breather but the trend is underway to get rid of some short dollar positions and the momentum in the war seems to be compellingly dollar-positive.

At the close of the week on April 4, the dollar rose to its highest level since March 31 versus the yen amid the first ground attack on Iraq’s capital since the 16-day-old war began.

The dollar was quoted at 119.87/90 yen up more than a half yen from late US levels. It briefly touched 120.00 yen, its highest level since the end of last month. The euro weakened to $1.0734/39 from $1.0758/64 in late New York and the peak of $1.0960 on April 2. But it firmed to 128.67/74 yen from 128.43 yen in late New York, helped by Japanese investors’ buying at the start of the financial year in April.

Sterling extended early losses against the dollar, made on news the US forces had seized the Baghdad’s international airport. Worse than expected the US employment data did little to knock the dollar off course.

Sterling had fallen half a per cent to the day’s lows of $1.5621 less than one cent above the year’s lows set on March 19, the eve of the US-led war. But the pound recovered around 10 ticks after Iraqi Information Minister Shahaf said Iraq may take non-conventional action. Sterling also dipped against the euro to 68.54 pence.

Sterling fell to four-year lows against the euro because of concerns about the domestic outlook and opposition to Britain’s backing of the war from within Prime Minister Tony Blair’s Labour Party. It has gained more than one per cent against the euro since April 1.