January 30, 2006	Monday	Zilhaj 29, 1426

The rupee/dollar parity moved both ways in a narrow band this week in the local currency market. In the inter bank market, the rupee shed two paisa on the opening day of the week, changing hands at Rs59.85 and Rs.59.86 versus the dollar.

Demand for dollar from the corporate sector exerted slight pressure on the rupee on January 23. However, it managed to recover one paisa for buying, while remaining unchanged for selling on January 24, when it traded at Rs.59. 84 and Rs59.86.

On January 25, the rupee firmly held its overnight level versus the dollar and traded unchanged at Rs.59.84 and Rs.59.86, despite high demand for dollars. It extended its firmness versus the dollar for the second consecutive day on January 26, when it retained its overnight level for buying and gained one paisa for selling to trade at Rs59.84 and Rs59.85 against the dollar.

The rupee gained one paisa versus the dollar for buying but did not show any change for selling on January 27, when the dollar closed at Rs59.83 at Rs59.85. At this level, the rupee in the inter bank market was almost unchanged over its previous week close levels against the dollar this week.

In the open market, the rupee gained 10 paisa versus the dollar on the opening day of the week and traded at Rs59.70 and Rs59.75. On the week's second day, it maintained its surge versus the dollar and picked up 10 paisa for buying and 15 paisa for selling to trade at Rs59.60 and Rs59.70 on smooth supply of dollar in the market. But on the third day of the week in review, the rupee failed to maintain its firmness and lost ten paisa for buying and five paisa for selling, changing hands at Rs59.70 and Rs59.75 on persistent demand for the US currency.

The downtrend in the rupee/dollar parity continued on the fourth day, when rupee shed 15 paisa more to trade at Rs59.85 and Rs59.90. Demand for dollar persisted in the open market on January 27.The rupee extended its overnight fall on the fifth day of the week in review and lost five paisa more versus the dollar to trade at Rs59.90 and Rs59.95. Over the previous week close, the rupee lost 10 paisa in the opening market this week.

The European single currency is performing well since the start of the year exerting downward pressure on the rupee in the open market.

On January 23, the rupee lost 40 paisa versus the rupee changing hands at Rs.72.50 and Rs.72.60. It, however, did not show any change in its present trend versus the euro, further shedding 20 paisa to trade at Rs.72.70 and Rs.72.80 on January 24.

The rupee maintained its overnight levels versus the euro on January 25 and traded at Rs.72.70 and Rs.72.80.The rupee shed another 10 paisa for buying and 15 paisa for selling to trade at Rs.72.80 and Rs.72.90 on January 26. It managed to recover 10 paisa versus the euro on January 27, changing hands at Rs72.70 and Rs72.80. The rupee this week recovered 20 paisa versus the European single common currency.

In the overseas markets, the US currency fell against the leading currencies as a result of major losses on the Wall Street on January 23. The dollar posted steep losses after one top Federal Reserve official suggested the bank's tightening cycle was coming to an end and another warned that wide US trade deficits posed a risk to global economic growth.

In late New York trade, the euro was up 1.4 per cent against the dollar at $1.2307, a four-month high and rupturing the rough $1.20-22 range of the past few weeks. Traders said markets broke options barriers in euro/dollar at $1.23 and $1.2310. The dollar also fell to 4-month lows against the Swiss franc on investor worries about an escalation in the stand-off between Iran and the West over Tehran's nuclear program.

The dollar traded lower at 1.2562 francs, down 1.5 percent from last week close. Against the yen, the dollar was down 0.8 percent at 114.36 yen. Sterling rose 0.9 percent to $1.7878.

On January 24, the dollar retraced the previous day's losses, as oil prices softened and US stock markets gained, fuelling profit-taking in other currencies that had risen against the greenback.

It had fallen sharply a day earlier, puncturing key technical levels, after Federal Reserve officials suggested the central bank's 18-month tightening cycle was nearly over and highlighted the dangers of the large US trade and budget deficits.

In late trading, the euro was trading down 0.3 per cent from previous day at $1.2280, having hit a four-month high of $1.2323 in Asian trade. Against the yen, the dollar was at 114.62 yen, up 0.2 per cent on the day.

The dollar was also up 0.3 percent against the Swiss franc at 1.2606 francs. Sterling was down slightly at $1.7849.

The dollar gained about 15 per cent against the euro and yen in 2005 mainly because US rate hikes burnished the allure of dollar-denominated deposits.

On January 25, the dollar recovered from earlier losses against major European currencies and rose sharply against the yen in largely technical trade. Analysts expected the dollar to trade firmer in the short term. With oil prices selling off, US interest rates headed higher faster than Europe's, and US stocks trading steady after some sizeable gains this year, the dollar has taken a positive tone.

In late trading, the euro was down about 0.3 percent at $1.2243, having traded above $1.2320.

The dollar was up 1.0 percent against the yen at 115.78 yen. The euro also traded higher against the yen, up 0.7 per cent from previous day's 141.76 yen. Sterling was nearly flat at $1.7842, pulling back from above $1.7900. Against the Swiss franc, the dollar was up 0.3 percent at 1.2638 francs.

Earlier in the global session, the euro and sterling hovered around four-month highs after stronger-than-expected data. The euro was boosted by a German business confidence survey, while the pound rose on British economic growth data.

But traders' unwillingness to extend the dollar's downtrend - the greenback has already lost around 3.5 per cent this year on a weighted basis - prompted a pullback, mainly spurred by technical factors.

On January 26, the dollar strengthened in choppy trade helped by rising US Treasury yields and stronger-than-expected US durable goods data suggesting the world's largest economy was still on a stable growth path.

US Treasury yields on two-year notes hit a peak of around 4.50 per cent, the highest since mid-November, while yields on ten-year bonds rose to a six-week peak around 4.54 per cent, according to Reuters data.

In late trading, the euro was trading lower at $1.2207, down 0.3 percent from a day earlier. The euro's slip against the dollar was also partly driven by a shift in market positioning.

Against the yen, the dollar rose to three-week highs around 116.53 yen, before trading back down to 116.36, up 0.5 per cent on the day. The low-yielding yen broadly weakened as investors sought currencies with higher interest rates, such as the US dollar.

Against the Swiss franc, the dollar traded up 0.4 percent at 1.2693 francs. Sterling was down 0.2 percent at $1.7805.

Currency market volume, however, was thinning as traders awaited direction from weekend's US growth figures and a Federal Reserve policy meeting scheduled for January 31.

At the close of the week on January 27, The dollar hit a three-week high against the yen after upbeat US data on business investment.

Orders for durable goods, closely watched for trends in capital spending, rose a robust 1.3 per cent in December, beating forecasts and underscoring the strength of the US economy.

The dollar little changed at 116.45 yen after hitting a three-week high of 116.58 yen in early Tokyo trade. It had risen around 2 per cent against the yen in the previous three days.

The euro dipped to around 142.00 yen from 142.15 yen in late New York trade and a six-week high of 142.30 hit during the previous session. The single currency was little changed around $1.2200.

The Swiss franc hit the week's low against the euro and four-day lows against the dollar after Switzerland's KOF indicator of business expectations came in at a weaker than expected 1.22 in January, and December's reading was revised downwards. Sterling was down 0.08 per cent at $1.7789, after hitting the session's high of $1.7878 on weak US growth figures.