February 6, 2006	Monday	Muharram 7, 1427

RANGE-bound trading was witnessed in the inter-bank market on the first day of the week. There was sufficient dollar supply to cover the demand. The rupee traded at Rs59.85 and Rs58.86 on January 30, against the last week’s close of Rs59.84 and Rs59.85.

On January 31, an increasing dollar demand by the importers exerted slight pressure over the rupee which lost two paisa changing hands at Rs59.87 and Rs59.88. Rising oil prices in world markets fuelled the import bill which pushed the demand for dollar. Local and foreign banks bought to meet the importers’ demand amid low inflows of the US currency.

On February 1, the rupee extended further losses versus the dollar which was traded at Rs59.90 and Rs59.92, down three paisa from its overnight levels, amid rising dollar demand by the corporate sector. On February 2, dollar-buying pressure eased and the rupee managed to recover three paisa for buying and four paisa for selling to trade at Rs59.87 and Rs59.88.

Smooth dollar supply situation persisted on February 3, which eased further pressure on rupee minimizing the losses. The rupee held on to its overnight levels versus dollar and traded at Rs59.86 and Rs59.88, bringing losses in the inter-bank market to only three paisa during the week in review.

In the open market, the rupee maintained its last week’s level versus the dollar for buying but shed five paisa for selling to trade at Rs59.85 and Rs59.95 on the opening day of the week in review. It closed last week at Rs59.85 and Rs59.90. The rupee, however, recovered five paisa versus the dollar for buying and 10 paisa for selling which traded at Rs59.80 and Rs59.85 on the second day of the week.

It further recovered five paisa versus the dollar for buying and remained unchanged at its overnight level for selling on February 1, changing hands at Rs59.75 and Rs59.85 on the third day of trading. The parity maintained its overnight level on the fourth day and traded unchanged at Rs59.75 and Rs59.85.

The rupee, however, shed five paisa against dollar in open market for buying, while it maintained its overnight level for selling to trade at Rs59.80 and Rs59.85 on the fifth day of trading. Over the previous week close, the rupee in the open market managed to recover five paisa versus the dollar this week.

Versus the European single currency, the rupee shed 15 paisa and traded at Rs72.20 and Rs72.30 on January 30, as against the previous week close of Rs72.05 and Rs72.15. On January 31, the rupee, however, gained 20 paisa versus the euro, which traded at Rs72 and Rs72.10.

The rupee on February 1, failed to retain its firmness versus the euro and shed 30 paisa to trade at Rs72.30 and Rs72.40. On February 2, the rupee gained 50 paisa in relation to euro changing hands at Rs71.80 and Rs71.90 as the single European currency lost its value in terms of the dollar in the world market.

On February 3, the rupee, however, lost 20 paisa versus euro finally closing the week at Rs72 and Rs72.10. During the week in review, the rupee gained five paisa against the European single common currency as compared to its previous week close levels.

The dollar moved both ways in the international markets versus the leading currencies ahead of the Federal Reserve policy meeting. On January 30, the dollar extended last week’s gains, particularly against low-yielding currencies like the yen and Swiss franc, as investors adjusted positions ahead of an expected US interest rate increase.

Late in New York session, the dollar was at 117.62 yen, up 0.2 per cent and close to a four-week high of 117.81 yen reached earlier in the session. The dollar was also up 0.2 per cent against the Swiss franc at 1.2868 francs. The euro was down slightly at $1.2089, while sterling was flat at $1.7681.

On January 31, the dollar pared losses after the Federal Reserve raised interest rates for the 14th straight time and issued a statement most traders interpreted as a sign there is at least one more hike to come. The US central bank’s Federal Open Market Committee raised its benchmark federal funds rate by 25 basis points to 4.5 per cent, as expected, on Chairman Alan Greenspan’s last day at the helm after 18 years.

As a result, the dollar’s pullback from session lows after the Fed’s rate hike was limited, with the greenback still ending the day weaker across the board. The euro was up 0.5 per cent against the dollar at $1.2151, compared with $1.2170 just before the FOMC decision came out.

The dollar was at 117.32 yen, down 0.2 per cent on the day but up from around 116.90 yen before the FOMC decision. The dollar had hit a four-week high of 117.81 yen a day earlier. The dollar was off 0.6 per cent against the Swiss franc at 1.2785 francs but up a little from 1.2760 francs before the Fed statement. Sterling was up 0.6 per cent at $1.7786.

On February 1, the dollar rallied high for the year against the yen, broadly supported by the rising US bond yields a day after the Federal Reserve raised interest rates and indicated more increases to come. In New York trading, the euro was at $1.2058, down 0.8 per cent.

Against the yen, the dollar was up 0.8 per cent at 118.10 yen, having earlier traded as high as 118.13 yen, its peak so far this year. The dollar was up 0.9 per cent against the Swiss franc at 1.2895 francs, while sterling was down a more modest 0.3 per cent at $1.7735.

On February 2, the dollar weakened against the major European currencies and pared gains against the yen which was weaker across the board, pressured by interest rate and yield differentials, the dollar was stronger on the day but off its highs. The dollar rose 0.4 per cent to 118.43 yen, slightly off a fresh seven-week high of 118.65 yen reached earlier.

In New York, the euro was up 0.3 per cent on the day at $1.2097, bouncing back sharply from a low of $1.2033, its weakest since January 13. The dollar fell 0.3 per cent on the day to 1.2850 Swiss francs, while sterling rose 0.3 per cent to $1.7798.

Finally at the close of the week on February 3, the dollar held near a seven-week high against the yen, though currency moves were tentative as traders awaited a US jobs report for clues about whether the Federal Reserve will keep raising interest rates. The dollar had risen since the US central bank bumped up its funds rate for the 14th straight time earlier in the week and signalled more rate rises were possible, though that was seen dependent on solid economic data.

The dollar was little changed on the day at 118.50 yen, not far from a seven-week high of 118.66 yen hit on electronic trading platform on February 2. The euro was flat $1.2090. The dollar had slipped against the euro and pared gains versus the yen on February 2, after the US intelligence chief said al Qaeda was still plotting and preparing for attacks on the United States.

The euro was trading at 143.25 yen, not far from a seven-week high of 143.40 yen struck a day earlier and a lifetime peak of 143.62 yen marked in December. Sterling slipped to a two-week low against the dollar and steadied near the previous session’s six-week peak versus the euro after a relatively strong US jobs report buoyed the greenback across the board.

The dollar rallied after jobs data showed the US unemployment rate fell to its lowest level since July 2001 in January and December payrolls were revised upwards, despite a weaker-than-expected headline number. Sterling sentiment was also soured by a record number of individual insolvencies and a surge in court orders for repossession of homes at the end of 2005 in England and Wales. The pound had hit a two-week low of $1.7614, down one per cent on the day.