The rupee maintained a firm posture against the dollar in the inter-bank market in the pre-holiday sessions last week ended November 13. It, however, failed to track the same pattern in the open market
due to rise in corporate demands for dollars to make several payments.
Last week in the inter-bank market, the rupee posted modest gain of seven paisa versus the dollar to close the week at Rs59.58 and Rs59.62.
In the open market, however, the rupee lost 20 paisa in terms of the greenback to trade at Rs60.10 and Rs60.20. Versus the euro it followed the suit, and lost the same amount at Rs76.70 and Rs70.
During the first four months of the fiscal year, the rupee lost nearly five per cent, touching the new low at Rs61.50 as a result of widening trade deficit and higher oil payments to global companies. According to Federal Bureau of Statistics, the trade deficit for the period from July to October was $1.43 billion against 314.72 million dollars in the same period of last year.
High oil prices and a sharp increase in the import of machinery and raw materials were mainly responsible for the trade deficit Since the cautionary measures taken by the central bank, the rupee has, however, recovered about one per cent in the inter-bank market.
Trading in the local currency market remained suspended for three days from November 15 to November 17, on account of Eid-ul Fitr. When trading resumed on November 18, the market still wore a holiday mood. The rupee, however, registered a significant improvement in relation to the dollar and the British pound in partially opened local currency markets amid slow trading.
The post-holiday session observed five paisa fall in the inter-bank market, where the dollar was seen changing hands at Rs59.63 and Rs59.68. The rupee, however, gained 10 paisa versus the dollar trading at Rs60.00 and Rs60.10 in the open market. Euro posted a fresh gain of 50 paisa versus the rupee trading at Rs77.20 and Rs77.50. It expanded its ground versus the rupee on the back of dollar's weakness in the international markets.
On November 19, declining trend persisted in the inter-bank market for the second day, as the rupee dropped five paisa to trade at 59.68 and 59.70 per dollar. Thus, the rupee lost 10 paisa in two days trading in the inter-bank market. The rupee managed to hold on to its overnight levels versus dollar for buying and selling at Rs60.05 and Rs60.10 in the open market on easy supply of dollars in the market.
Profit-taking, however, pushed euro rates down versus dollar in the international markets. As a result, the rupee recovered 30 paisa in relation to single European currency at Rs76.80 and Rs77.10 amid modest trading. Over the previous week close, the rupee this week shed only 10 paisa versus the Euro.
In the international financial markets, the dollar has been under heavy downward pressure in recent weeks as dealers become increasingly concerned about the widening US current account gap.
It was mostly firmer on November 15, as a drop in oil prices gave added impetus to dealers paring positions after the dollar's recent brush with historic lows. US oil prices fell more than $2 a barrel to nearly $45, its lowest in two months, before cutting losses to stand about 1 per cent lower in the session at $46.87.
The euro was off 0.24 per cent at $1.2943 while sterling was 0.55 per cent weaker at $1.8463. The dollar was 0.27 per cent weaker against the yen at 105.25 yen, just above fresh seven-month lows of 105.18 yen plumbed overnight.
It was 0.64 per cent stronger at 1.1790 Swiss francs, more than recovering the losses suffered previous weekend when renewed worries about instability in the Middle East sent the safe-have Swiss franc sharply higher.
On November 16, the dollar staged a modest rally after data released by the Treasury showed the net capital flows into the United States in September were enough to cover the country's current account gap in that month and were larger than analysts had forecast. The dollar has been sold heavily in recent weeks, taking it to record lows against the euro of $1.3005 and its lowest level against a basket of currencies in 9 years.
In New York, the euro was up 0.08 per cent at $1.2955, while sterling was 0.34 per cent higher at $1.8526. The dollar rose 0.05 per cent to 105.30 yen. Against the Swiss franc, the dollar fell 0.25 per cent to 1.1758 francs.
On November 17, the dollar dropped to an all-time low against the euro ahead of a G20 finance ministers' meeting as analysts fretted that officials would do little to stem the currency's fall.
A stream of quite upbeat US economic data was largely ignored because currency traders are more focused on long-term factors that are hurting the dollar, including the wide US current account deficit and global foreign exchange policy.
The dollar slipped to new 7-month lows against the Japanese yen. The euro soared to all-time peaks around $1.3047 against the US currency late in New York. It was trading at $1.3032, up 0.6 per cent on the day.
Earlier, asset managers were selling dollars and buying Asian currencies, breaking options barriers for the euro around $1.3010 and exacerbating the euro's move higher.
Sterling fell to an 11-month low against a high-flying euro but the pound still managed to hit a four-month high against a struggling US dollar. Sterling climbed to a high of $1.8628 before easing to $1.8555 as the dollar fought back.
On November 18, the dollar rallied from a record low against the euro as traders attempted to square positions ahead of a meeting of G20 finance ministers. Policymakers have been playing down the possibility the group would take any coordinated action to slow the dollar's fall, or even focus on currencies at the Berlin G20 meeting.
The dollar earlier hit a record low against the euro for the second straight day at $1.3074. In New York, the euro was much lower, trading at $1.2956, down 0.61 per cent on the day.
Sterling was off 0.54 per cent at $1.8499. The dollar was up 0.79 per cent against the Swiss franc at 1.1710 francs, having earlier slipped to 1.1598 francs, the lowest in nearly 9 years. Against the yen, it rose 0.20 per cent to 104.20.
The dollar sank across the board, dropping to four and a half-year lows against the yen on November 19, after Federal Reserve Chairman Alan Green span said demand for US assets could ease at some point given the size of the current account deficit.
The US current account deficit, a broad measure of the nation's global trade, is equivalent to roughly 6 per cent of gross domestic product.
To bridge that gap, the United States must attract an estimated $3 billion in capital daily. Green span added that cutting the US budget deficit, which for fiscal year 2004 ending Sept. 30 totalled $412 billion, would be the most effective US policy response to help rein in the record shortfall in the current account.
In New York trade, the euro traded up 0.8 per cent at $1.3055, within sight of its all-time peak around $1.3074. The euro fetched around $1.2975, up slightly from 1.2962.
The dollar fell to around 102.75 yen, the lowest level since April 2000. The US currency's losses against the yen accelerated after Green span said that large currency interventions do not create protracted changes in exchange rates.
In London, sterling moved back towards a four-month high against the dollar but hit an 11-month low against the euro, caught in cross fire as the greenback slid against all major currencies.
Sterling had fallen to 70.32 pence per euro, hitting an 11-month low for a third consecutive day. Against the dollar, the pound rose as high as $1.8613, before paring gains to stand 0.4 per cent higher on the day at $1.8572.
