AMID slower trading activity, balanced demand and supply of dollar saved the rupee from fluctuating sharply versus in local currency market last week due to the continued inflow of dollars in earthquake aid. The earthquake has reportedly affected some 25 million people in the Northern Areas of Pakistan.
On October 17, however, the rupee in inter-bank market showed marginal fall versus dollar in early trading session, due to higher demand by the corporate sector. By the end it limited its slide by falling two paisa for buying and one paisa for selling at Rs59.74 and Rs59.75, against its previous week close of Rs59.72 and Rs59.74.
On October 18, due to sufficient dollar supply, the rupee was able to gain strength picking up two paisa to change hands at Rs59.72 and Rs59.73. On October 19, no change was seen in the inter-bank market as dollar supply helped rupee to hold overnight levels.
The rupee retained its overnight levels for second successive day on October 20. On October 21, it rose by one paisa against the dollar changing hands at Rs59.71 and Rs59.72. It recovered two paisa over its previous week close.
In the open market, rupee opened on a positive note, gaining five paisa against the dollar to trade at Rs60 and Rs60.10 on October 17. On the last week end, the rupee/dollar parity was at Rs60.05 and Rs60.15. On October 18, the rupee appreciated by five paisa against the dollar for buying at Rs60.05 while it retained its selling rate at Rs60.10.
On October 19, the dollars’ supply was high on rising remittances by the expatriates and aids for earthquake victims in shape of foreign exchange. The rupee did not show any change versus the dollar in process of comfortable supply of dollar. The rupee continued to retain its overnight levels at Rs60.05 and Rs60.10 on October 20.
Easy dollar supply on October 21 helped the rupee to recover its ground by gaining five paisa at Rs60 and Rs60.05. Over the previous week close the rupee managed to recover ten paisa versus the dollar in the open market.
Against the European single common currency, the rupee picked up five paisa versus the euro and traded at Rs72.20 and Rs72.30 on the first day of the week in review, as compared to its previous week end levels of Rs72.25 and Rs72.35. The rupee continued its appreciation versus the dollar on the second day of the week in review and gained further 50 paisa versus the euro changing hands at Rs71.70 and Rs71.80.
On the third day, the rupee appreciated against the euro by 30 paisa to trade at Rs71.40 and Rs71.50. The rupee held its last levels in terms of the euro at Rs71.40 and Rs71.50 on the fourth day also. As a result of modest recovery in the euro’s value globally, the rupee shed 20 paisa versus the single European currency on the fifth day of the week to trade at Rs71.60 and Rs71.70 on October 21. During the week, the rupee gained 65 paisa against the euro.
In the international financial markets, the dollar moved both ways in the morning session of October 17, as it shed its gains versus the yen. It, however, maintained its surge versus the euro. The dollar in the final hours, pulled further away from a two-year high against the yen as traders trimmed positions after data late last week showed tame US core inflation and a hefty drop in the industrial production.
In late trade, the euro was down 0.4 per cent since last week at $1.2022. Sterling was down 0.8 per cent at $1.7537. The dollar was up 0.5 per cent against the Swiss franc at 1.2920 francs. The euro’s downside was limited by the re-emergence of solid demand around $1.20 that has kept brief any fall below that psychologically important level in recent months.
On October 18, the dollar gained bolstered by release of data showing a sharp increase in the US producer prices last month as well as strong foreign demand for the securities. The jump in September PPI added fuel to expectations that the Federal Reserve will continue to raise interest rates to tame mounting price pressures, while the robust capital inflows in August suggest the United States is having no difficulty in funding its current account deficit.
Both are dollar-positive and investors reacted accordingly, keeping the dollar buoyed near a two-year high against the yen. In late New York trading, the euro was down 0.6 per cent at $1.1958, while sterling was 0.2 per cent weaker at $1.7511. The dollar was up 0.6 per cent at 115.65 yen, having risen to a 25-month high of 115.94 yen earlier in the day. The dollar was also up 0.5 per cent against the Swiss franc at 1.2985 francs.
On October 19, the dollar fell retreating from a 25-month high against the yen and a three-month peak against the euro, as investors considered the outlook for interest rates is priced into the US currency. In late New York trading, the euro strengthened to $1.1994, up 0.3 per cent overnight and above a three-month low of $1.1876 hit earlier.
Against the yen, the dollar slipped to 115.30 yen, down 0.3 per cent, after earlier rising to new 25-month peaks around 116 yen. Sterling was up 0.4 per cent against the dollar at $1.7580, gaining 1-1/2 cents from session lows around $1.7430. It bounced back from early losses against the dollar as many in the market had thought at least a few members of the bank’s Monetary Policy Committee would have presented a case to cut borrowing costs given recent signs of weak economic growth.
On October 20, the dollar surrendered early gains to end lower against the euro but little changed against the yen as a key US business conditions index did little to increase expectations for more rate hikes. With higher rates already anticipated, data that is much stronger than expected would be needed to increase expectations for the pace and size of rate hikes and send the dollar higher.
The Canadian dollar eased against the US dollar after the Bank of Canada downgraded its growth outlook. But the bank also said monetary policy was still accommodative and made it clear it would continue to raise rates. The US dollar was up 0.1 per cent at C$1.1774. In late New York trading, the euro was up 0.2 per cent at $1.2017, a solid gain from its three-month low of $1.1873 on October 19. It had traded as low as $1.1949 earlier in the session.
The dollar was almost unchanged at 115.32 yen, off the day’s high of 115.77. It touched a two-year high of 116. Sterling jumped after much stronger-than-expected British retail sales further dampened talk of a cut in interest rates this year. It was trading at $1.7745, up 0.5 per cent.
At the close of the week on October21, the dollar dipped against the euro in choppy trade after its rally stalled and some traders booked profits, though expectations for higher US interest rates supported the currency. The euro, benefiting from the dollar’s early losses, also rose above 139 yen for the first time in six months in trade dictated by stop-loss orders triggered in a batch of currencies.
Investors have been squaring long dollar positions since the dollar rose to a two-year high against the yen and a three-month peak versus the euro earlier in the week. But a relentless stream of comments by Federal Reserve officials suggesting the central bank will not halt its tightening anytime soon has helped to keep the dollar’s strength intact, traders said.
The euro bought $1.2040 up from around $1.2025 in late US trade. It had risen as far as $1.2078, propelled higher by a series of stop-loss orders. The single European currency fetched 138.95 yen, up 0.2 per cent. Its early gains against the dollar had helped it to a six-month high of 139.07 yen.
The dollar bought 115.45 yen up slightly after recovering from a dip below 115 yen in early deals. It hit a two-year high of 115.98 earlier in the week, according to electronic trading platform EBS. Some market participants said that while the dollar would continue to raise, a barrier of option-related sell orders around 116 yen was blocking the currency’s path higher for now.
Sterling approached one-month highs against the euro and was firm against the dollar on Friday after third quarter growth data supported increasing expectations of steady UK interest rates in November. It was slightly up from the US close at $1.7765, after hitting two-week highs of $1.7799 early session. Sterling also rose to two-week highs on its trade-weighted index, at 100.5.
AMID slower trading activity, balanced demand and supply of dollar saved the rupee from fluctuating sharply versus in local currency market last week due to the continued inflow of dollars in earthquake aid. The earthquake has reportedly affected some 25 million people in the Northern Areas of Pakistan.
