June 12, 2006	Monday	Jumadi-ul-Awwal 15, 1427

THE rupee moved both ways versus the dollar in the currency market on June 5, amid low trading. It shed two paisa against the dollar over last week close of Rs60.11 and Rs60.13 and traded at Rs60.13 and Rs60.15 due to slightly higher demand of the US currency by the corporate sector in inter-bank market on the opening day of the week. Banks bought nearly 30-40 million dollars to meet the payments as the financial year is nearing the close. Dollar supply was modestly thin as exporters did not sell greenback, anticipating increase in the US currency value.

On June 6, the rupee appreciated by three paisa versus the dollar, changing hands at Rs60.10 and Rs60.12 during the post-budget trading on improved dollar supply. The rupee/dollar parity continued its upward trend on June 7 as the rupee extended its overnight winning steak, picking up more two paisa against the dollar in inter-bank market to trade at Rs60.08 and Rs60.10.

On June 8, bullish trend was seen in the inter-bank market as increased demand for dollar restricted further gains in rupee value. The rupee failed to maintain its past two days firmness and shed three paisa versus the dollar to close at Rs60.11 and Rs60.13, as some banks reportedly bought nearly 20-30 million dollars to clear the import bills.

Dollar-buying pressure kept the rupee down on June 9. The rupee extended further losses versus the dollar, shedding four paisa versus the US currency to trade at Rs60.15 and Rs60.17, amid increased demand for dollar by the banks, to clear the import bills. The importers reportedly bought nearly 40-50 million dollars. During the week, the rupee in the inter-bank market lost only four paisa against the dollar.

In the open market, the rupee held its firmness, showing no change versus the dollar on June 5. It commenced the week, trading at its previous weekend’s Rs60.50 and Rs60.60. On June 6, the rupee, however, gained five paisa versus the dollar for buying and another 10 paisa for selling to trade at Rs60.45 at Rs60.50. The rupee maintained its firmness versus the dollar on the third consecutive day, trading unchanged at Rs60.45 and Rs60.50 on June 7.

The rupee failing to maintain its past three days firmness, slipped down seven paisa versus the dollar on June 8, changing hands at Rs60.52 and Rs60.57 due to strong demand for the greenback. On June 9, the rupee moved both ways versus the dollar, gaining two paisa for buying, but shedding three paisa for selling to trade at Rs60.50 at Rs60.60. The rupee, this week showed a stable trend in the open market.

Versus the European single common currency, the rupee shed five paisa and traded at Rs77.90 and Rs78.00 on June 5, compared to Rs77.85 and Rs77.95 in the previous week. On June 6, the rupee, however, managed to increase its value versus the euro, changing hands at Rs77.65 and Rs77.75. It gained 25 paisa, amid modest trading.

The rupee continued its upturn versus the European common currency and posted fresh gain of 40 paisa to trade at Rs77.25 and Rs77.35 on June 7. On June 8, the rupee managed to extend its firmness over the euro, recovering 45 paisa to trade at Rs76.80 and Rs76.90. On June 9, Rupee gained 50 paisa against the euro and traded at Rs76.30 and Rs76.40. The rupee managed to gain 55 paisa over the euro.

In the international financial markets, the dollar rose against the euro and yen on June 5, after the Federal Reserve Chairman Ben Bernanke said the central bank would remain vigilant in its attempts to stem a rise in core inflation. That increased market expectations the Fed would raise interest rates later this month and pushed the euro down to $1.2907, near its $1.2902 session low. Indeed, some traders noted that the market was severely short dollars heading into Bernanke’s remarks and was looking for an excuse to cover these positions.

The US currency has shed more than nine per cent against the euro since the start of 2006 and almost five per cent against the yen.

Against the yen, the euro was still up 0.35 percent on the day at 144.87. The dollar was up 0.45 per cent against the yen at 112.22, near its session peak of 112.30.

Sterling hit a one-month low against the euro as recent strong eurozone data fuelled talk of a 50 basis points ECB hike this week at a time when expectations for a rise in the UK rates this year are fading. It was trading at 68.93 pence per euro at around levels last seen in early May and down 0.4 per cent on the day. It was also 0.1 per cent lower against the dollar at $1.8787.

On June 6, the dollar gained across the board after a Federal Reserve policy-maker was quoted as saying it was safer to err on the side of “going a little too far” in fighting inflation.

That had most market participants betting the Fed will extend its campaign of 16 straight interest rate rises by lifting its overnight rate to 5.25 percent at its next meeting on June 28-29 from the current five per cent.

The greenback was up 0.87 per cent against the yen at 113.21 yen, after touching a one-month peak of 113.57 yen. The euro was down 0.54 per cent at $1.2835, after falling to a session low of $1.2808. Against the yen, the euro was up 0.32 per cent at 145.32 yen, supported by the Japanese currency’s sharp slide against the dollar and expectations that the European Central Bank will lift rates by a quarter percentage point to 2.75 per cent. The dollar is still down around seven per cent this year against a basket of six major currencies. Against the dollar, sterling was down half a per cent at $1.8634.

On June 7, the dollar crept higher, supported by growing expectations that the Federal Reserve will raise interest rates later this month. The greenback gained for the third straight session, a rally that started after Fed Chairman Ben Bernanke said that the central bank needed to be vigilant to keep inflation under control. Fed funds futures indicate the market believes there is an 84 percent chance the Fed would raise rates by a quarter points to 5.25 per cent this month, up from around 48 per cent on last week.

In recent New York trade, the euro was down 0.24 per cent on the day against the dollar at $1.2790 after touching a day low of $1.2760. Against the yen, the dollar was 0.23 per cent higher at 113.48 yen, within range of the fresh one-month peak of 113.69 yen hit earlier. The single currency hit a one-year peak of $1.2980 earlier this week. Sterling was down 0.23 of a per cent at $1.8542, hitting it weakest level since May 26. The pound rose almost a quarter per cent to trade at 68.78 pence per euro.

On June 8, the dollar gained for the fourth straight session, hitting a one-month high against the euro as investors shed high-risk assets for fear that rising global interest rates could slow economic growth. The greenback’s rally began after the European Central Bank dashed expectations of a half-percentage-point hike in euro zone interest rates, opting for a quarter points instead. It extended those gains when ECB President Jean-Claude Trichet gave no clear signs that the central bank was set to increase the pace of its monetary tightening, sending the euro to its biggest daily percentage loss in two months.

The euro had moved off its session low of $1.2627 but remained 1.06 per cent weaker on the day against the dollar at $1.2650, more than three cents below week’s opening day’s peak of $1.2980.

Against the yen, the euro briefly hit a record high of 145.69 after the ECB decision but retreated to 144.40, down 0.54 per cent on the day. The dollar was up 0.54 per cent against the yen at 114.13 yen after briefly testing 114.74 yen, a six-week high. The dollar index ended New York trade up 0.91 per cent at 85.83, the biggest daily gain since January. Sterling fell one per cent to a one-month low against a broadly strong dollar after the Bank of England left rates unchanged at 4.5 per cent as expected.

At the close of the week on June 9, the dollar hovered near a one-month high against the a day after rallying on indications the European Central Bank would be modest in raising interest rates this year. The ECB raised rates by 25 basis points to 2.75 per cent, disappointing some expectations for a rise of 50 basis points, and appeared to stamp out the possibility of cranking up the pace of future rate increases. The dollar’s gains against the euro had also taken it to a six-week high versus the yen and a one-month peak against the pound.

The euro changed hands at $1.2640, near the one-month low of $1.2626 struck on electronic trading platform EBS on June 8. The US currency slipped 0.2 per cent to 113.95 yen as some investors locked in profits from the dollar’s rise to 114.74 yen in the previous session, its highest since late April. The euro fell to 144.05 yen from around 144.50 yen in late US trade. It briefly touched a record high of 145.71 yen.