The rupee commenced the week on a negative note, falling 2 paisas against the dollar on November 10, on account of the short supply of dollar in the inter-bank market.

The dollar traded slightly higher at Rs57.42 and Rs57.43 against the previous weekend level of Rs57.40 and Rs57.41. However, excess dollar supply in the inter-bank market on November 11, helped the rupee recover from its overnight losses and gained 3 paisas for buying and 2 paisas for selling to trade at Rs57.39 and Rs57.41 against the dollar. The rest of the week witnessed bullish sentiments with the rupee maintaining its winning streak on account of excess dollar supply. In last three days trading, the rupee gained 10 paisas against the dollar in the inter-bank market. The rupee closed the week on a strong note with the dollar changing hands at Rs57.29 and Rs57.31, up 11 paisas from the previous week close of Rs57.40 and Rs57.41.

In kerb trading, the rupee appreciation against the dollar continued throughout the week. Positive economic indicators are helping the rupee. Upward trend in home remittances, large buildup of foreign exchange reserves and rising exports have brought dollar under selling pressure in the absence of major demand. The dollar was at Rs52 in FY00. It went as high as Rs63.98 in FY01. However, in the post-9/11 scenario the rupee saw rapid exchange rate appreciation in sharp contrast with continuously depreciating exchange rate for past many decades. Consequently the dollar came down to Rs60.02 in FY02 and further to Rs57.81 in FY03. This trend has continued in FY04. This week the rupee in the kerb continued to extend further gains after opening the week at Rs57.47 and Rs57.57 against the dollar on November 10. It closed the week on November 14, on a positive note with the dollar changing hands at Rs57.25 and Rs57.35 reflecting 25 paisas gain for rupee against the previous week close of Rs57.50 and Rs57.60.

Against the euro, the rupee has remained fluctuated. After showing gains of 20 paisas against the euro in the first two trading days, the rupee has assumed a downward trend against the single European currency. It lost 155 paisas in the last three trading days touching the week’s lowest level at Rs67.20 and Rs67.40 against the euro on November 14. When compared with previous week close of Rs66.10 and Rs66.30, the rupee during the week in review lost 110 paisas versus the euro. Currently investors are investing in euro.

Against other major currencies at the inter-bank forex counter, the rupee lost ground versus the British pound, the Canadian, Australian, New Zealand and Singapore dollars, the Swiss franc, the Danish and Norwegian kornes, the Swedish krona, the Japanese yen and the South Korean won. The rupee continued to show strength versus the Hong Kong dollar, the Chinese yuan, the Malaysian ringgit, the Thai bhat, the Kuwaiti dinar, the Saudi and Qatari riyals and the UAE dirham.

On the international front, the yen climbed to a 10-month high versus the euro and rose against the dollar on November 10 after weekend elections in Japan returned a reform-minded government to power, albeit with a smaller power base. In early New York trade, the euro fell to 124.70 yen, a loss of more than one per cent in value, but just slightly above the 10-month low near 124.55 yen. The dollar fell in concert, dropping to a 1-1/2 week low near 108.55 yen off 0.75 per cent on the day. The Aussie dollar traded up one per cent to US $0.7156, while the New Zealand dollar climbed US $0.6206, a gain of 0.73 per cent. The greenback fell to C$1.3122 against the Canadian dollar, a loss of 0.86 per cent on the day.

The Australian and New Zealand dollars hit six-year highs against the US dollar. Prospects of rising interest rates in these two economies, contrasted against the likelihood US benchmark rates will hold steady at 45.year lows of one per cent, are driving the greenback lower. In the case of Australia, which raised interest rates to 5 per cent last week, the likelihood of a further rate rise before year-end was heightened in the Reserve Bank of Australia’s monetary policy statement that the Aussie dollar’s strong rally this year was “the normal pattern” in light of a strengthening global economy.

Sterling held above last week’s four-week lows against the dollar and was little changed versus the euro with few domestic factors available to affect the exchange rate. Last week sterling had pulled back form four-week lows on the greenback, set in the wake of rise in interest rates by the Bank of England which had sparked a bout of profit-taking. Sterling traded at $1.6725, up from the four week lows of $1.6563 set but steady on the day. It was also slightly up against the euro from last weekend levels at 68.77 pence.

On November 11, the yen slipped from three-year highs against the dollar and lost a step against the euro after suspected intervention by Tokyo put a check against the rapid buying of the Japanese currency. A long-standing downside bias for the dollar brought the greenback broadly lower as a period of a strong US economic data has come to an end without sparking a big rally and future data might not be as rosy. With the US financial markets in a lull during the Veterans Day holiday and lack trading was subdued.

The dollar held unchanged at 108.65 yen, up from previous day’s three-year low of 107.86 yen, while the euro climbed to 125.25 yen, up 0.40 per cent after having dropped over one per cent to a 10-month low. The euro rose slightly trading at $1.1519 per dollar, 0.30 per cent on the day and just around a cent above seven-week lows set last week. Among the dollar block, the New Zealand dollar soared to a new six-year high of US $0.6266 before slipping back to US $0.6255, a gain of 0.67 per cent on the day.

Sterling slipped across the board as news of an unexpected deterioration in Britain’s trade position dampened sentiment ahead of the Bank of England’s quarterly inflation report. Sterling made broad-based gains October on the prospect of aggressive interest rate hikes, forging to five-year highs against the dollar and seven-month peaks against the euro. But in the past week, the British currency has come under pressure as investors have been keen to unwind long sterling positions after the Bank of England’s quarter-point rate hike. The pound was teetering at a two-week low beyond 69 pence per euro nursing losses of half a per cent on the day. Against the dollar, it was a third of a per cent weaker at $1.6650.

On November 12, the dollar weakened against several major counterparts pressured by the absence of key new US economic data as investors sought more proof that recovery in the United States is on a firmer path. In late New York trading, the euro was up over one per cent against the dollar at $1.1645. It rose sharply against the yen, up over one per cent at 126.51 yen, after triggering a raft of automatic buy orders on the break of key chart levels.