August 11, 2003	Monday	Jumadi-us-Sani 12, 1424

The rupee/dollar parity remained range bound this week amid persistent demand pressure. In the inter-bank market, the rupee commenced the week on a weak note.

Pressurized by rising dollar demand, it lost one paisa for buying and 2 paisa for selling and traded at Rs57.80 and Rs57.82 on August 4. The rupee showed no major variation on August 5, as normal demand and supply of dollar pulled the rupee up by one paisa to trade at Rs57.79 and Rs57.81.

The rupee further managed to gain one paisa on August 6, on weak dollar demand, which changed hands at Rs57.78 and Rs57.80. However failing to maintain its firmness over the dollar, the rupee on August 7, revert to its August 5 position following one paisa fall to trade at Rs57.79 and Rs57.81 against the dollar. The parity moved down further after one paisa fall in rupee value on August 8 when the dollar was seen trading at Rs57.80 and Rs57.81. No major change was noticed in the parity in the inter-bank market, amid dull trading during the week.

In the kerb, the dollar remained in short supply and the rupee came under slight pressure. It lost 7 paisa in first two days trading on continued demand pressure. The kerb market opened the week at Rs58.40 and Rs58.45 on August 4. The rupee moved down further by 5 paisa to trade at Rs58.45 and Rs58.48 on August 5. Continued demand pressure in the kerb, pushed the rupee down further on August 6, by 7 paisa for selling, while remaining unchanged for buying, when it traded at Rs58.45 and Rs58.55 versus the dollar.

Though falling trend persisted in the kerb due to tight dollar supply, the rupee on August 7, managed to recover 2 paisa for selling, changing hands at Rs58.45 and Rs58.53 at close. The down trend continued on August 8, when the rupee shed another 5 paisa for buying and 2 paisa for selling against the dollar, which traded at Rs58.50 and Rs58.55. Over the previous weekend close, the rupee shed 12 paisa against the dollar.

Against the euro, the rupee continued its down trend and lost 80 paisa in first three days trading. The euro was changing hands at Rs66.30 and Rs66.50 on August 6 against last weekend close of Rs65.50 and Rs65.70. The rupee, however, staged a recovery of 20 paisa on August 7, when euro was quoted at Rs66.10 and Rs66.35. Another 10 paisa gain on August 8 in rupee value made the euro trade at Rs66.0 and Rs66.20, still 50 paisa down from its previous weekend’s level of Rs65.50 and Rs65.70.

Against other major currencies at the inter-bank counter, the rupee this week displayed strength over the British pound, the Kuwaiti dinar and the New Zealand dollar. It weakened versus the Canadian, Australian and Singapore dollars, the Japanese yen, the Dansih and Norwegian krones, the Swedish krona and the Korean won. The rupee was stable against the Hong Kong dollar, the Chinese yuan, the Malaysian ringgit, the Saudi and Qatari riyals and the UAE dirham.

On the international front, the dollar retreated against the euro and Swiss franc but rose marginally against the yen on August 4 as investors sought safer-haven currencies in a market still reeling from a disappointing the US labour report. The euro breached a key technical levels of $1.1340 against the dollar, which should open the way for a corrective rebound of up to the $1.14 level.

The single currency was up 0.79 per cent against the dollar at $1.1362. Against the yen, the euro gained 0.93 per cent, to 136.74 yen. The dollar was trading at 120.33 yen slightly up 0.20 per cent. Sterling held firm against the dollar but lost ground to the euro as broad gains in the single currency dominated a thin volume session. The pound stood at $1.6120 in late European trade, up marginally on the day and more than a cent above last weekend low. However, the British currency failed to keep pace with a broadly-firmer euro and slipped nearly half a per cent to 70.30 pence.

On August 5, the dollar was range bound after a brief spike earlier as persistent concerns about a gaping US current account deficit overwhelmed the market’s initial euphoria over a strong service sector report. After a short-lived rally earlier in the day, the dollar pared its gains against most major currencies. The euro was down 0.11 per cent against the dollar at $1.1346 after falling close to the $1.1300 mark. The dollar was marginally higher against the Swiss franc, up 0.13 per cent at 1.3502 francs. Short-covering on the yen has boosted the Japanese currency across the board. The euro was down 0.53 per cent against the yen, trading at 136 yen. The dollar was also weaker against the Japanese unit, down 0.36 per cent at 119.85 yen.

Sterling slipped against the dollar as better than expected US non-manufacturing data buoyed the greenback across the board and wiped out early gains made for the pound after strong British data. The dollar leapt after ISM non-manufacturing business activity index rose to 65.1 in July, it’s highest since the survey began in July 1997. I lost a third of a per cent against the dollar to $1.6062 from $1.6113 in late New York having earlier risen to $1.6143. Against the euro it stood at 70.46 pence against 70.45.

On August 6, the dollar advanced against most major rivals in technically driven trade as currency investors eyed an upcoming Treasury note auction with some caution. The euro briefly slipped to $1.1355 from $1.1380 in thin volume with traders citing an 8confirmed rumour emanating from London that Iraq’s Saddam Hussein had been captured, but the euro was creeping back up. The dollar drew some support as US stock markets partially reversed losses, with the currency hovering in ranges ahead of the bond sale, in the wake of a dismal Treasury three-year note auction the previous day.

It drew more of a bid tone as the Dow Jones industrial average climbed into positive territory, up 0.5 per cent and the Nasdaq composite index pared losses, down 0.6 per cent. A surprise jump in the Institute for Supply management’s service sector report lent the dollar on fleeting relief. Early afternoon in New York, the dollar had recovered from its earlier one-week lows against the euro. The euro was at $1.1369 against the dollar, down 0.2 per cent on the day. The dollar was at 120.25 yen against the Japanese currency, up 0.4 per cent. Against the Swiss franc the dollar was at 1.3474 francs, flat on the day.

Sterling drifted off a one-week high on the dollar as the greenback inched up against other majors and the market settled in to await a Bank of England interest rate decision. The pound was slightly weaker on the day at $1.6128 after touching its highest level for a week early in the session at $1.6188. Against the euro it was a shade lower at 70.55 pence although it was up from one-week low of 70.76 on August 5.

On August 7, the dollar fell steeply against the yen and more moderately against other major rivals in partly technically-driven trade, weighed down by some earlier US data releases. The greenback got a modest initial lift from the Treasury’s sale of $18 billion in 10-year notes, the final leg of its $60 billion quarterly refunding. The auction showed a bid-to-cover ratio of 2.00, a fair measure of demand, with a high yield of 4.37 per cent.

The Japanese currency stole the limelight among the majors as the North American trading session wore on, climbing more than 1 per cent against the dollar and 0.7 per cent against the euro. Although traders had not seen evidence of yen-weakening currency market intervention by the Bank of Japan, which acts on behalf of Japan’s Ministry of Finance in that event, traders are bracing for that possibility. As the dollar threatened to fall close to a key 118.70 yen support level, the could test the Bank for Japan’s resolve. The euro was at $1.1373 against the dollar, up 0.4 per cent on the day. The dollar was at 118.86 yen against the Japanese currency, down 1.2 per cent. Against the Swiss franc the dollar was at 1.3512 francs, down 0.1 per cent on the day.