The rupee/dollar parity remained stable this week amid modest fluctuations. The week commenced on a negative note as dollar buying by some foreign banks to cover their oil payment requirements pushed the dollar demand in the inter-bank market on April 21.
The rupee lost 3 paisa against the dollar and traded at Rs57.80 and Rs57.83 compared to previous weekend close of Rs57.78 and Rs57.80. It further lost one paisa on April 22 as most bank continued dollar buying in the inter-bank market.
The market, however, showed a turnaround on April 23, as most banks were selling their stocks anticipating further decline in the parity. This helped the rupee to stage a recovery. The rupee gained 2 paisa during the day and traded at Rs57.80 and Rs57.82 against the dollar. The rupee continued its upward advancement in the remaining week and gained 8 paisa closing the week at Rs57.75 and Rs57.76. There was no unusual demand for dollar in the last three days.
In kerb trading, the rupee/dollar parity remained stable at Rs57.90 and Rs57.95 throughout the week. However, euro continued to show strength versus the rupee and crossed Rs63 barrier this week. On April 21, the rupee lost 15 paisa and traded at Rs62.85 and Rs63.15 against the euro. In the following three days, the rupee lost another 60 paisa against the euro and traded at Rs63.45 and Rs63.75 on April 24. The rupee stage a mild recovery versus the euro on April 25 and gained 15 paisa there by closing the week at Rs63.30 and Rs63.60.
Against other major currencies, the rupee extended further losses versus British pound, Canadian and Australian dollars, Swiss franc, Swedish krona, Danish and Norwegian krones and Kuwaiti dinar. It, however recovered against Japanese yen, New Zealand and Singapore dollars and remained unchanged against Saudi and Qatari riyals, the UAE dirham, Malaysian ringgit, Chinese yuan and Hong Kong dollar.
In the international financial markets the dollar moved higher on April 21, drawing some cheer from the yen’s fragility against a bevy of major rivals. The yen tumbled to its lowest level in four years against the euro and fell against the dollar, as renewed concerns about the economic health of Japan caused investors to flee its currency. One of the catalysts for the yen’s fall was bearish remarks by the Bank of Japan governor.
In New York, the dollar was trading at 120.54 yen, up 0.6 per cent. Against the Swiss franc, the dollar was up 0.48 per cent at 1.3891 francs. Against the single European currency, the dollar was modestly higher, with the euro buying $1.0861. The euro reached as high as 131.00 yen during the session, its highest since May 1999. The euro was buying 130.95. Market in London were closed for Easter Holidays.
On April 22, the dollar dropped sharply dragged lower by an undertow of accelerating flows into higher-yielding currencies and waning confidence about the state of the US economy. Among the major currencies the dollar was trading at 119.93 yen, down 0.45 per cent. Against the Swiss franc, the dollar fell 1.2 per cent to 1.3706 francs. Against the single European currency, the dollar was down 0.9 per cent, with the euro, buying $1.0970. The euro squeezed just above the psychologically key $1.1000 mark in intra-day trade reaching a session high around $1.1002.
Sterling hit a four-year low on the surging euro as investors snapped up the single currency across markets, while Britain’s uncertain economic and euro entry prospects weighed on domestic sentiment. But sterling’s one per cent advance on the dollar during the session showed that much of the move was related to euro strength rather than a renewed bout of sterling selling. It traded at 69.50 pence per euro, slightly above the four-year low of 69.71 pence. Against the dollar it was at $1.5792, up 1.1 per cent.
On April 23, the dollar firmed against the yen helped by buoyant stocks, as positive corporate profits reports helped brighten an otherwise quite sombre US economic outlook. But the greenback was virtually flat against the euro and only modestly higher against the Swiss franc, after quietly back-pedalling in the wake of the Federal Reserve’s Beige Book report that cited “lacklustre” economic activity in March and early April.
The yen wakened, on Japanese investors’ continued purchases of foreign assets. The euro’s swift climb against the yen, hitting four-year highs above the 132.0 yen mark, also bolstered the single currency against the greenback.
The euro broke through barrier options at 132 yen, after bumping against that level a number of times. In New York, the dollar traded at 120.40 yen up 0.40 per cent. The euro bought 132.04 yen up 0.43 per cent. Against the Swiss franc, the dollar rose 0.23 per cent to 1.3739 francs. The euro was flat on the session, buying $1.0964 and trading not for below a six-week high above $1.1000 it reached on April 22.
Sterling also rose nearly 0.75 per cent from the day’s lows against the dollar, to $1.5829, after falling all year against the euro due to worries about the US-led war against Iraq and about a worsening domestic economic outlook. The dollar retreated on April 24, weighed by slipping stocks and some poor US economic data that allowed the euro to climb to six-week highs. The euro rose to new six-week highs at $1.1048 versus the dollar, up 0.75 per cent from its previous day’s close. The dollar fell by more than 1.20 per cent against the Swiss franc to stand near 1.3575, also at a six-week low.
Although the greenback has been fairly immune to negative market sentiment associated with the global spread of Severe Acute Respiratory Syndrome or SARS, the effects were becoming more pronounced in neighbouring Canada. The Canadian dollar fell sharply against the US currency on a combination of SARS worries and dovish remarks by the bank of Canada, which dealers took as a sign rate hikes may be on hold for a while. The US dollar was buying C$1.4563, up 0.37 per cent.
In New York, the dollar was trading at 119.83 yen, down 0.44 per cent. Against the Swiss franc, the dollar fell 1.04 per cent at 1.3605 francs. Against the single European currency, the dollar fell 0.70 per cent, with the euro, buying $1.1041. Sterling rose against the dollar for a third straight session but remained soft near its recent four-year low on the euro as concerns over the US economy weighed on the greenback versus the euro. It stood at $1.5914, having risen to a one-month high of $1.5940. March of the activity took place early in Europe, leaving the pair drifting in a tight range throughout the session. Against the euro it erased early losses to hold steady on the day at 69.14 pence but was still near its four-year low of 69.77 set on April 23.
At the close of the week on April 25, the yen slid to four-year lows against the euro pressured by steep falls in the Tokyo stock market and reports that North Korea had confirmed it has nuclear weapons.
The euro fought off heavy option-related resistance and broke the closely watched level of 132.50. Traders said the next target would be a break above 133 year. The euro was at 132.46 yen but still above late New York level of 132.35 on April 24.
The dollar, helped by the euro’s rise against the yen, firmed to 120.77 against 119.83 in late US trade. But traders said the rise will probably be capped given heavy Japanese exporters’ yen-orders from around 120.50. The market expected the dollar to climb through 121 yen and the failure to do so gave an impression that its topside was extremely weighted. The euro was at $1.1015 versus the late US level of $1.1029.
