THE rising oil prices in international markets exerted downward pressure on the dollar in local market. Big banks were seen buying dollars in the inter-bank market to cover their import bill payments. Importers were also present in the market to buy dollars to meet their forward requirements. The rupee shed eight paisa versus the dollar which traded at Rs59.70 and Rs59.72 on August 29, against the previous week’s close of Rs59.62 and Rs59.64.
On August 30, the rupee recovered two paisa against the dollar with the rupee/dollar parity changing hands at Rs59.68 and Rs59.69 in modest trading. In the absence of major payments, the rupee managed to recover its lost ground. On August 31, the rupee shed one paisa against the dollar and traded at Rs59.69 and Rs59.70. Comfortable supply of dollar helped the rupee to limit its fall versus the rupee.
On September 1, the market again witnessed major local and foreign banks engaged in purchasing dollars to meet their import payments, as soaring oil prices in the world markets created dearth of dollar in local market. Dollar buying by local and foreign banks during the day pushed the rupee lower versus the dollar which was traded at Rs59.70 and Rs59.72, down two paisa over the previous day.
The range-bound trading was seen on September 2, as the rupee did not show major change versus the dollar. It traded at Rs59.71 and Rs59.73. Despite the rising demand for dollars, the rupee managed to retain its level due to improved supply of the US currency. Over the previous week close, the rupee in the inter-bank market lost nine paisa this week.
In the open market, the rupee maintained its firmness on the opening day of the week, showing no change versus the dollar in its weekend’s rates of Rs60.05 and Rs60.15. On August 30, however, the rupee gained two paisa versus the dollar to trade at Rs60.03 and Rs60.13.
On August 31, the rupee failed to maintain its firmness over the American currency and lost four paisa for buying and two paisa for selling, changing hands at Rs60.07 and Rs60.15. The rupee resisted further change on September 1, despite rising demand for the US currency. The rupee/dollar parity was quoted at Rs60.05 and Rs60.15.
On September 2, the rupee recovered 10 paisa against the dollar, trading at Rs59.95 and Rs60.05 on easy supply of dollar. Soft US economic data and rising concern about the economic fallout from the recent hurricane, particularly on the US oil refineries in coastal Louisiana, Mississippi and Alabama pushed the dollar lower sharply. This week, the rupee managed to recover 10 paisa in the open market.
Versus the European single common currency the rupee shed 20 paisa on the first day of the week for buying and 10 paisa for selling to trade at Rs73.60 and Rs73.80 compared to its last week close of Rs73.40 and Rs73.70. However, the rupee posted fresh gain of 55 paisa against the euro, changing hands at Rs73.05 and Rs73.30 on the second day of the week.
On the third day of the week, the rupee did not show major change in relation to the euro, which was quoted at Rs73.10 and Rs73.30 on declining demand in the international markets. The rupee, however, lost its value versus the euro and traded at Rs73.70 and Rs73.90 on the fourth day of the week. The single European currency posted fresh gain in the world market, which supported the rupee in the open market.
The dollar’s slide in world markets boosted the single European currency’s value in the local market on the fifth day of trading. The euro gained Rs1.20 versus the rupee trading at Rs74.50 and Rs74.80 after sharp decline of the dollar in the world markets on September 2. During the week, the rupee lost 150 paisa against the euro in the open market.
In the world markets, the oil prices crossed 70 dollars mark a barrel on August 29, in the Asian trading. Experts have attributed this continuous rise in the oil rates to the Iraq war. They are of the opinion that if the tensions prolonged in the region, the prices might climb further in the near future.
On August 29, the dollar rose broadly in a thin market as investors started to bet on fairly robust US economic reports this week. The dollar also withstood a hurricane that hit the south of the United States, as surging crude oil prices battered the yen more than other major currencies. US crude oil futures soared to a record $70.80 a barrel, as Hurricane Katrina strengthened into one of the fiercest storms ever to hit the United States.
As a result of increase in oil prices the dollar came under pressure in the Asian session. But oil then came off record peaks to trade near $67. The dollar weathered the jump in oil prices well, partly because the yen is more exposed to surging oil, given Japan’s reliance on imported crude and as currency traders turned attention to other factors.
In late trade, the dollar was up 0.4 percent against the yen to 110.59 yen. Against the dollar, the euro traded as high as $1.2345 overnight before options-related defence of the $1.2350 barrier brought the euro zone currency lower. It was down 0.4 percent to $1.2228. Sterling slipped 0.2 percent to $1.7963. The dollar was up 0.6 percent against the Swiss franc to 1.2672 francs.
On August 30, the dollar gained against the yen as crude oil pushed to new record highs above $70 per barrel, but the disruption Hurricane Katrina caused to US oil refining facilities capped the dollar’s gains against the euro. Since Japan imports all of its crude, expensive oil is likely to put the Japanese economy - and the yen - under pressure.
The dollar hit a three week-high of 111.69 yen before paring gains to trade at 111.25 yen in late New York trade. Investors were also betting this week’s slew of US economic data would boost the US currency. The yen also weakened partly because of turmoil in Indonesia whose currency, the rupiah, briefly plunged by almost 9 percent against the dollar to a four-year low because of fears of an economic crisis.
The euro dipped below $1.2180, near session lows, in the wake of stronger-than-expected data on US consumer confidence earlier. However, by late New York trade it had partially recovered to trade around $1.2221, down 0.1 per cent from the overnight levels. Sterling was down 0.5 per cent to $1.7860 weighed down by Bank of England data showing the lowest rise in mortgage lending in three years in July.
On August 31, the dollar slid after a report showed business activity in the US Midwest contracted unexpectedly, for the first time in more than two years. The euro last changed hands up by one per cent against the dollar at $1.2343 in mid trade. Before the data, the euro zone single currency had traded around $1.2210. August was the best month for euro/dollar since December.
The dollar fell 0.6 per cent against the yen to 110.60 yen. Earlier, the US currency hit a three-week high at 111.78 yen as the Japanese currency struggled with the anticipated impact high oil prices will have on Japan, which imports all the crude oil it uses. The dollar has rebounded for most of 2005 on expectations the Federal Reserve will continue its rate hiking campaign, boosting the allure of some short-term dollar denominated assets.
The dollar was down 1.3 per cent against the Swiss franc to 1.2530 francs, posting its biggest one-day percentage decline since February. That helped the greenback post its worst month against the franc since November. Sterling gained 1 percent to $1.8037, which helped the pound show its best monthly performance against the dollar since November.
Oil was once again one of the main drivers of the currency market even as oil futures eased from record highs. Energy experts said the two-year bull-run that took oil to $70.85 on August 30, may not have run its course. This placed downward pressure on currencies in oil-reliant Asia, which were already reeling from fears of an economic crisis in Indonesia after its currency plunged to a 4-year low against the dollar this week.
On September 1, the dollar fell to three-month lows against the euro, pound and Swiss franc after news of slower growth in the US manufacturing, fuelling expectations of a pause in tightening of the US monetary policy. The euro rose to $1.2485 in late afternoon trade, up 1.2 per cent. Earlier it had risen to $1.2524, it’s highest since late May, before paring gains.
The dollar fell 0.7 per cent against the yen to 109.83 yen, while the euro rose to 137.11 yen. Against the Swiss franc, which has drawn strength from increasing investor risk aversion amid high oil prices, the dollar was down more than 1.4 per cent at 1.2355 francs. Sterling climbed to $1.8326, up 1.62 per cent on the day. It was the currency’s best performance against the dollar in percentage terms since January 2004.
At the close of the week on September 2, the dollar edged up after hitting a three-month low against the euro a day earlier on yet more weak US economic data that fanned speculation the Federal Reserve could soon halt its series of interest rate increases. This week’s US data has all come in worse than expected, compounding investor jitters about the economy’s outlook from record-high oil prices and the severe destruction caused by Hurricane Katrina.
The euro had eased to $1.2485 from around $1.2500 in New York trade. The single currency climbed as high as $1.2525 and is up about three per cent from lows near $1.2170 on August 30. It also hit three-month lows against the Swiss franc and sterling. The dollar was at 109.61 yen, down nearly a quarter per cent. Sterling hit a 3-month high against the dollar, as the US currency came under selling pressure after a slew of weak economic data this week.
It hit its highest level since mid-May at $1.8429 before the US jobs data was released. By mid-afternoon it was trading at $1.8344, little changed from the US close. Sterling rose 1.7 per cent on September 1, its biggest one-day gain since January 2004.
THE rising oil prices in international markets exerted downward pressure on the dollar in local market. Big banks were seen buying dollars in the inter-bank market to cover their import bill payments. Importers were also present in the market to buy dollars to meet their forward requirements. The rupee shed eight paisa versus the dollar which traded at Rs59.70 and Rs59.72 on August 29, against the previous week’s close of Rs59.62 and Rs59.64.
