THE rupee was able to resist sharp fall on the opening day of the week on comfortable dollar supply position. However, an increased dollar demand by the corporate sector exerted slight pressure on the rupee/dollar parity. As a result, falling trend was witnessed in the inter-bank market on January 16, when the rupee lost two paisa against the dollar for buying and slid one paisa for selling changing hands at Rs59.87 and Rs59.88. Last week the rupee closed at Rs59.85 and Rs59.87.

Falling trends persisted on January 17. Both local and foreign banks were in the market to buy dollars to meet their payment needs. The rupee further shed two paisa and traded at Rs59.88 and Rs59.90, amid rising demand for dollars On January 18, the rupee managed to recover modestly though, demand for dollars by the corporate sector persisted. It gained two paisa more against the dollar, which traded at Rs59.86 and Rs59.88.

On January 19, the rupee extended further gains of two paisa versus the dollar and traded at Rs59.84 and Rs59.86, despite the high demand for dollar. Increased inflows of remittances boosted the rupee’s value versus the US currency. The rupee managed to recover one paisa more versus the dollar on January 20, closing at Rs59.83 and Rs59.85, amid rising demand for dollar. Over the previous week close, the rupee in the inter bank market gained two paisa versus the dollar this week.

In the open market, the rupee gained five paisa against the dollar on the opening day of the week, changing hands at Rs59.65 and Rs59.70 against last week’s close of Rs59.70 and Rs59.75. On the second day of the week in review, the rupee further lost 10 paisa against the dollar and traded at Rs59.75 and Rs59.80. Falling trend continued in the open market for the third for the third day in a row. The rupee shed five paisa more to trade at Rs59.80 and Rs59.85.

The rupee did not show any change versus the dollar on the fourth day of the week in review and traded at its overnight levels of Rs59.80 and Rs59.85. It drifted lower against the dollar on the fifth day of the week in review closing at Rs59.85 and Rs59.90 as a result of higher demand for the US currency. During the week, the rupee in the open market lost 15 paisa versus the dollar.

Versus the European single currency, the rupee showed a fluctuating trend throughout the week in review. It lost 50 paisa on January 16 and traded at Rs71.90 and Rs72.00 compared with its previous week close of Rs71.40 and Rs71.50. It, however, gained 15 paisa on January 17 to trade at Rs71.75 and Rs71.85.

On January 18, the rupee again shed five paisa, changing hands at Rs71.80 and Rs71.90. It, however, held its overnight levels on January 19, showing no change versus the euro, which remained quoted at Rs71.80 and Rs71.90, on the fourth day of trading. The rupee also shed five paisa against the euro and traded at Rs71.85 and Rs71.95 on the fifth day of trading on January 20. This week, the rupee lost 45 paisa against the euro.

In the international markets, trading conditions were thin on January 16, as the US financial markets were closed for a national holiday. In Tokyo trading, the dollar drifted lower versus the major currencies. It stayed in sight of a three-month low against the euro after comments by the European Central Bank chief kept alive market expectations for the ECB interest rates to rise in coming months.

The US currency also remained under pressure from a growing view in the market that the rate advantage the dollar has over other currencies could soon narrow, traders said. Although the dollar was seen burdened by rising expectations of its dwindling rate advantage, some dealers said support for the US currency against the euro and the yen was beginning to gel around current levels.

The US currency has been slipping since the start of 2006, dented by minutes from the Federal Reserve’s policy meeting last month that suggested the Fed may be near the end of its tightening cycle. Moderate economic data has underscored such speculation.

The euro was little changed on the day at $1.2145, off its session high around $1.2175 but still in sight of a three-month peak above $1.2185. The dollar inched up to 114.40 yen after the Japanese currency ran into some selling due to euro/yen buying by US funds that took the single currency to just under 139 yen.

The dollar had fetched around 114.20 yen in late US trade last week close.

Sterling slid from a five-week high against the dollar, after a report which showed British producers’ input prices rising at a much faster annual rate in December than output prices. It was down 0.57 per cent against the dollar at $1.7652 after touching the day’s low of $1.7642, extending losses after the data was released. The pound had hit a five-week high of $1.7797 in Asian trading.

On January 17, the dollar pared gains as oil prices climbed on upheaval in Nigeria and Middle East tensions with talk that Iran may curtail its crude oil exports in response to pressure on its nuclear program. Though an Omani government official said it was unlikely Iran would take such action, attacks on Nigerian offshore fields by local militants added to currency investor unease over crude prices.

The prospect for higher US rates relative to other large, industrialised economies boosted the dollar last year, partly because it heightened the allure of dollar-denominated deposits. The dollar had climbed earlier after a report showed US industrial capacity use at its highest rate in five years, bolstering the case for further Federal Reserve interest rate increases to head off inflation.

The euro slipped by 0.1 per cent from a day earlier to $1.2105, after earlier slipping as low as $1.2052. It has remained in a narrow range of around $1.2000 to $1.2180 for the past two weeks. The dollar was up around 0.5 percent to 115.41 yen after going as high as 115.92 yen.

Sterling was down 0.1 per cent against the dollar at $1.7676 after briefly dipping below $1.76, sliding on data that showed the UK consumer price inflation falling back to the Bank of England’s two per cent target in December.

On January 18, the dollar pared gains and was little changed against the euro in volatile trading after a European Central Bank board member denied a news agency report that he wanted higher interest rates. The euro initially got a boost when the ECB Executive Board member Lorenzo Bini Smaghi was quoted as saying the euro zone interest rates are too low given economic growth potential and that he favoured further rate hikes.

The euro was last little changed at $1.2105, still well entrenched in a range of $1.2000 to $1.2180 for the past two weeks. Against the Swiss franc, the dollar was also little changed at 1.2805 francs. Against the yen, the dollar fell 0.1 per cent to 115.22 yen after earlier testing 12-day highs near 115.90 in Tokyo, as the Tokyo stock market fell nearly three per cent.

Sterling slipped against the euro and held steady versus the dollar after data showed UK wage growth slowed in the three months to November, sparking talk of a cut in interest rates. It was little changed from previous day’s levels against the dollar at $1.7670. The pound traded at 68.72 pence per euro, down over a third of a per cent on the day.

On January 19, the dollar was little changed against the euro. It posted only a modest rise against the yen amid mixed economic data and the US currency’s inability to rise above two-week-old trading ranges. After see-sawing back and forth, the dollar got some support from luncheon remarks by Dallas Federal Reserve Bank President that most areas of the United States were exhibiting very strong economic growth.

But midway through the New York trading day, a report that Osama bin Laden said in an audio tape that new attacks on the United States were being prepared sparked a technically driven sell-off in the dollar and then kept the greenback’s recovery muted. The euro was last little changed against the dollar at $1.2096, remaining within the well-worn ranges between $1.2000 and $1.2180 it has occupied for the past two weeks.

Against the yen, the dollar was at 115.39, up 0.2 per cent and in the middle of the 114-yen-to-116-yen range the dollar has shuttled in for the past couple of weeks. The euro traded at 139.60 yen, up 0.1 per cent from the previous day’s close. The dollar was up 0.3 per cent against the Swiss franc at 1.2836

Sterling dropped to a one-week low against the dollar but recovered later in the session as the market tempered its reaction to recent economic data It jumped against the dollar just before the US labour market and housing data but shed some of its gains shortly after the data release and was down 0.35 per cent against the dollar at $1.7566 after hitting a seven-day low at $1.7528.