11 October 2004	Monday	25 Shaban 1425

Mixed sentiments were witnessed in the local currency market, where the rupee/dollar parity moved both ways in narrow range this week. Easy supply of dollar, amid rising demand, resisted steep fall in rupee value , and the rupee remained under slight pressure.

On the week's opening day (October 4), the inter bank witnessed slight improvement as the rupee staged a modest recovery gaining three paisa versus the dollar, which changed hands at Rs59.23 and Rs59.26 on October 4. There was easy supply of dollars due to dollar selling by some exporters in the market, which helped the rupee to stage a recovery.

Bearish sentiment prevailed in the market on October 5, as the rupee unable to maintain its overnight firmness, lost six paisa and traded at Rs59.29 and Rs59.31. The dollar demand increased amid short supply.

However, the central bank landed support by arranging dollars to Parco for clearing payments, which limited fall in rupee value. On October 6, the rupee did not fluctuate sharply as a result of slight improvement in supply of the dollars.

It was quoted at Rs59.30 and Rs59.32. Trading remained range bound throughout the day. On October 7, continued buying of dollars forced the rupee to shed five paisa more. The dollar was seen changing hands at Rs59.40 and Rs59.41.

The banks are actively buying dollars as they speculate heavy payments for oil in coming days in view of rising oil prices in the international market. The oil prices soared to touch the new high of $52.23 per barrel. Analysts expect the oil prices to continue upward trend touching new high at $55 per barrel.

On October 8, the rupee-dollar parity in the inter bank market remained almost unchanged at its overnight level and traded at Rs59.40 and Rs59.42 on easy supply of greenback. During the week, the rupee in the inter bank market lost 14 paisa against the dollar.

Analysts expect that the rupee may hit Rs.62 by year end in view of rising oil prices in the international market. Rise in oil prices and higher imports have given rise to dollar demand, which is exerting pressure on rupee.

In the open market, the rupee managed to hold on to its last week levels versus dollar and traded unchanged at Rs59.57 and Rs59.62 on October 4. It did not fluctuate sharply versus dollar on October 5 and traded at Rs59.55 and Rs59.65 after gaining two paisa for buying and shedding three paisa for selling.

However, failing to hold its firmness on October 6, the rupee lost five paisa over the dollar for buying to trade at Rs.59.60 but remained unchanged at Rs59.65 for selling.

The rupee was unchanged at Rs59.60 and Rs59.65 on October 7. On October 8, it further lost eight paisa versus dollar at Rs59.68 and Rs59.73 in the open market. The rupee's fall versus the greenback is attributed to persistent demand for dollars by banks. Over the previous weekend the rupee this week has lost 11 paisa against the dollar in the open market.

Versus the euro, the rupee gained 20 paisa on the week's opening day changing hands at Rs73.15 and Rs73.45. The rupee also maintained a rising trend versus the euro on October 5, gaining 35 paisa more to trade at Rs72.80 and 73.10.

The rupee continued its downtrend against the European single common currency on October 6, and shed another five paisa to trade at Rs72.85 and Rs73.15, amid low activity. On October 7, rupee weakness over euro persisted.

It traded at Rs73.10 and Rs73.40 after shedding 25 paisa. The rupee further lost 30 paisa on October 8, and traded at Rs73.40 and Rs73.70. In the week as a whole, the rupee shed 5 paisa for buying and 7 paisa for selling, amid fluctuations.

In the international financial market, the dollar rallied broadly on October 4, after a statement by the Group of Seven richest nations brought no surprises, allowing some optimism about US economic prospects to bolster the currency.

In a statement after a regular meeting, the G7 countries reiterated a call for more "flexibility" in the exchange rates of major economies, which many analysts saw as a reference to China, whose currency is pegged to the dollar.

In New York, the euro was trading around $1.2283, down about 1.0 per cent on the day. Against the yen, the dollar was up 0.4 percent to 110.93 yen. The Swiss franc, the dollar climbed 1.1 percent to 1.2642 francs.

Sterling fell 0.9 per cent to $1.7835, just above two-week lows hit earlier in the session. Against the euro, the pound recovered slightly to 68.85 pence but still within sight of eight-month lows beyond 69 pence hit last weekend.

On October 5, the dollar softened after bearish reports on the US services sector and the job market and caused a sell-off ahead of widely anticipated September employment data.

In New York, the euro rose 0.2 per cent to $1.2314. Against the yen, the dollar gained to 111.12 yen, as the Japanese currency reeled from the impact of soaring crude costs. Japan, which imports almost all of its crude, is seen as the most vulnerable to high prices among major economies.

The euro was also well bid against the yen, trading 0.4 per cent higher at 136.85 yen. The dollar fell against the Swiss franc to 1.2615 francs. Sterling traded nearly flat at $1.7830, its lowest level in almost three weeks against the dollar.

In London, it approached a recent eight-month low versus the euro after a weaker-than-expected survey of Britain's service sector. It had fallen to $1.7804, its lowest since September 16, before trimming losses to $1.7845.

On October 6, the dollar firmed but stayed in narrow ranges as traders adjusted positions before weekend US payrolls data for September, the final jobs report before November's presidential elections. Soaring oil costs boosted the dollar to a one-week high against the yen after crude for November delivery hit a record $52.15 a barrel in New York.

In addition, comments by the President, Federal Reserve Bank of St. Louis seeming to suggest US interest rates may continue rising even beyond a "neutral" 3 to 5 per cent also supported the dollar.

In New York, the euro was down around 0.2 per cent at $1.2284 while against the yen, the dollar rose about 0.1 per cent to 111.33 yen. It was up 0.2 percent against the Swiss franc at 1.2643 francs.

Sterling fell to an 8-month low on the euro and touched it's lowest in almost three weeks on the dollar as weaker than expected manufacturing output data fuelled expectations of static UK interest rates.

Against the dollar it was 0.2 per cent weaker at $1.7780 and on its trade weighted index it dipped to its lowest in over 8 months, at 102.1. The pound was supported in the early part of this year by market expectations for higher interest rates.

The dollar traded flat to slightly lower on October 7, after a top Federal Reserve official said a slowing US economy could justify a pause in interest rate rises, spurring a mild sell off.

In New York, the euro was down slightly at $1.2283. The dollar fell against the yen, trading at about 111.16 yen. The greenback was virtually flat against the Swiss franc at 1.2642 francs.

Sterling was unruffled by the Bank of England's widely expected decision to hold interest rates unchanged. The BoE kept interest rates at 4.75 per cent for the second month running and left analysts pondering whether more rate hikes will still come in the current monetary tightening cycle.

Sterling traded steady on the day at 68.93 pence per euro, after hitting an eight-month low of 69.17 a day earlier. It was also unchanged against the dollar at $1.7810.

At the close of the week on October 8, the dollar weakened after top US Federal Reserve officials sounded cautious on credit tightening, fuelling jitters in the market ahead of US employment figures.

The yen also benefited from renewed speculation that China may revalue the yuan after news that President Bush spoke to Chinese President on currency issues. Last-minute selling by Japanese exporters ahead of the US non-farm payrolls data for September also dented the dollar.