The rupee, for last three weeks, is under pressure in the local currency market as corporate demand for dollars to meet heavy payments and the central bank's dollar-buying to maintain higher foreign exchange reserves have completely dried up the market.
As a result, the dollar has tested the physiological level of Rs57.52, which was last seen on October 22, 2003. Since last quarter of 2003, the dollar had taken enough beating against major currencies. It also suffered losses against most of the Asian regional currencies, mainly due to positive growth in the region and weaker US economic outlook.
This week also, the rupee continued its weakness versus the dollar by losing two paisas to trade at Rs57.49 and Rs57.51 in the interbank market on March 15. On the following day, however, a slight fall in demand for dollar helped the rupee recover four paisas, changing hands at Rs57.45 and Rs57.47 on March 16. The rupee stayed firm versus the dollar on March 17, and traded at Rs57.44 and Rs57.45, up two paisas versus the dollar.
On March 18, tight supply of dollar pushed the rupee value down by two paisas at Rs57.46 and Rs57.48, as the dollar posted fresh gain on rising demand by different quarters.
Another five paisas fall was recorded in the value of the local currency on March 19, pushed the parity down further in the interbank market. The dollar traded at Rs57.51 and Rs57.53 at close. During the week, the rupee, however, showed only three paisas loss over the previous week close of Rs57.48 and Rs57.50
In kerb trading, the rupee extended its weekend slide versus the dollar in the open market on the week's opening day as a result of rising dollars demand in the inter bank market.
It lost five paisas in relation to the dollar and changed hands at Rs57.70 and Rs57.75, on March 15. The rupee remained under pressure on March 16. It shed 2 paisas versus the dollar and traded at Rs57.72 and Rs57.77. On March 17, the rupee showed a marginal decline of just one paisa trading at Rs57.73 and Rs57.78.
Since last week, the rupee started showing weakness and lost nearly 30-35 paisas in terms of dollar. The dollar has remained in demand for genuine payments in the interbank market and some urgent purchases from different quarters pushed the rates high.
On March 18, amid balanced demand and supply position of dollars, the rupee did not show any change versus the greenback in the open market, where the American currency traded at Rs57.73 and Rs57.78.
The rupee continued unchanged for third successive day and managed to hold its overnight level despite pressure on March 19. Over the previous weekend close, the rupee, however, lost eight paisas in the kerb in the week in review.
The gap between the inter bank and open market rate widened further to 25 paisas after having increased to 20 paisas in the previous week. The high demand for dollars on March 15, kept the rupee-dollar parity rates down in both the open and the interbank markets.
Versus the euro, the rupee also adopted a similar trend, dropping 45 paisas for buying and selling at Rs70.85 and Rs71.15. The rupee shed another 26 paisas against the euro on March 16, trading at Rs71.11 and Rs71.41. On March 17, the rupee picked up about 50 paisas versus the euro for buying and selling at Rs70.58 and Rs70.88.
The rupee lost 28 paisas against the euro for buying and selling at Rs70.86 and Rs71.16, on March 18. The rising demand for euro on March 19, could not resist the decline in the rupee, which shed 34 paisas, changing hands at Rs71.20 and Rs71.50. In the week as a whole, the rupee lost 80 paisas versus the euro.
Against other major currencies at the inter bank forex counter, the rupee this week displayed its weakness over the Canadian, Australian, New Zealand and Singapore dollars, the Swiss franc, the Danish and Norwegian krones, the Swedish krona, the British pound, the Japanese yen and the South Korean won. It did not show any change versus the Chinese yuan, the Malaysian ringgit, the Hong Kong dollar and the Saudi and Qatari riyals. The rupee, however showed strength over the Kuwaiti dinar, the UAE dirham and the Thai bhat.
In the international financial market, the dollar retreat on a report that the Bank of Japan is considering scaling back intervention during the week. In New York trade the dollar trimmed some of its losses against the yen, down 0.5 per cent at 110.29 yen. The euro was up around 0.4 per cent against the dollar at $1.2271. It was down about 0.7 per cent at 1.2750 Swiss francs. Sterling was trading up at $1.8056 on March 15.
On March 16, the dollar fell steeply against the yen but held nearly unchanged versus the euro on the week's opening day, influenced more by market positioning and intervention issues than by the Fed's decision not to raise interest rates.
The euro first rose on the Fed's decision before quickly losing ground. According to Reuters data, the euro hit a session low around $1.2239, before climbing back to just under the unchanged mark of $1.2271.
The dollar was already down sharply against the yen on market speculation the Japanese Ministry of Finance could be poised to cut back on its large yen-selling/dollar-buying intervention operations.
On March 17, the yen hit a three-week high versus the dollar and a six-week peak against the euro, amid rising speculation Tokyo may reduce its huge yen-selling intervention.
At the same time, international investors looking for low corporate valuations see Japan's rising economic prospects as a good recipe for currency gains, fuelling yen demand in order to buy into a strengthening Tokyo stock market. The dollar fell 0.61 per cent to 108.21 yen, above the session nadir of 107.97 yen, its lowest level since February 20
According to Reuters data, the euro fell to a six-week low of 131.71 yen, but rebounded to 132.40 yen, off 0.89 per cent on the day. The dollar slipped briefly against the Swiss franc after an explosion rocked a Baghdad hotel, killing at least 27 people.
It then recouped much of its losses to trade nearly unchanged at 1.2768 francs. The euro fell against the dollar to $1.2235, weighed by the single European currency's losses against the yen, traders said. Sterling rose to $1.8160.
Sterling hit a one-week high against the euro in London, encouraged by upbeat the UK employment data, but held steady on the dollar as Britain's annual budget came in broadly as expected. It had risen to a one-week high of 67.36 pence against a broadly weaker euro, up a third of a per cent on the day. Against the dollar it held steady at $1.8135 having fallen to $1.8069 earlier.
The dollar retreated on March 18, undermined by the yen's broad rally amid a surge in Japanese equity inflows and the Bank of Japan's seeming absence from the marketplace.
Japanese officials have warned they would act against sudden currency moves but speculation Japan is scaling back its massive intervention to suppress the appreciating yen against the dollar helped the Japanese currency rise for the fourth consecutive day. Positive US economic data caused a brief, moderate rise in the dollar against the euro, as markets focused on the yen's price movement across the board.
In New York trade, the dollar fell to a one-month low of 106.62 yen before trading back up to 106.90, down over one per cent. The euro also fell sharply against the yen, dropping to a six-week trough of 130.82 yen but traded back up to 131.49 yen.
Against the dollar, the euro rose to $1.2294 benefiting from the greenback's losses versus the yen, though the euro remained stuck in the broad range it has adopted since hitting a record high at $1.2927 in mid-February.
Sterling rose to its highest level for over a week against the euro and the dollar on March 18 as robust retail sales data reinforced expectations of higher British interest rates.
