November 20, 2006	Monday	Shawwal 27, 1427

ON the opening day of the week, the rupee moved down in the inter-bank market shedding three paisa on buying counter and four paisa on selling counter and traded versus the dollar at Rs60.71 and Rs60.73 on November 13, after closing last week at Rs60.68 and Rs60.69.

On November 14, the rupee continued its downtrend and lost one paisa against the dollar changing hands at Rs60.72 and Rs60.74. On November 15, the rupee weakness persisted and depreciated against the dollar by two paisa for buying and one paisa for selling to trade at Rs60.74 and Rs60.75.

On November 16, the rupee further extended its weakness versus the dollar. It shed four paisa over the previous day close and traded at Rs60.78 and Rs60.79. The rupee continued its weakness on November 17, losing four paisa versus the dollar to trade at Rs60.82 and 60.83, as demand for dollars increased by the imports. During the week in review, the rupee in the inter-bank market lost 12 paisa on continued increase in demand for the American currency.

In the open market, the rupee moved in a narrow range versus the dollar and shed five paisa on the buying counter while remaining unchanged on the selling counter, changing hands at Rs60.70 and Rs60.75 on the first day of trading. It had closed at Rs60.65 and Rs60.75 last week. The rupee was able to retain its firmness due to good supply of dollars Firmness prevailed on the second day, as supply was enough to meet the demand. The rupee recovered two paisa and traded at Rs60.68 and Rs60.73 on November 14.

Weakness prevailed in the open market on the third day of trading as the rupee drifted lower due to strong demand for dollars it shed two paisa versus dollar for buying and seven paisa for selling to trade at Rs60.70 and Rs60.80 on November 15, touching its lowest in two years. The rupee further extended its overnight weakness versus the dollar, losing eight paisa for buying at and five paisa for selling to trade at Rs60.78 and Rs60.85 due to strong demand for dollars on the fourth day of the week in review.

All round declines were seen in the currency market on the fifth day as demand for dollars increased by the importers The rupee extended its overnight weakness versus the dollar, losing eight paisa for buying and five paisa for selling and traded at Rs60.86 and Rs60.90 due to strong demand for dollars Over the week, the rupee in the open market lost 15 paisa against the dollar.

Versus the European single common currency, the rupee continued to weakened on November 13, losing 15 paisa and traded at Rs77.65 and Rs77.75 against last week close of Rs77.50 and Rs77.60. The euro gained ground on the back of its strength in the international markets. However, slight improvement in supply of dollars pushed the rupee to expand its ground, picking up 30 paisa in terms of the euro changing hands at Rs77.35 and Rs77.45 on November 14.

On November 15, the rupee held its overnight levels versus the euro, which traded at Rs77.35 and Rs77.45 as the dollar showed mixed trend in the world markets. But it lost 25 paisa against the euro on November 16, when it traded at Rs77.60 and Rs77.70 as the dollar fell versus the yen and other currencies. On November 17, the rupee continued unchanged against the euro and traded at its overnight levels of Rs77.60 and Rs77.70. The rupee, however, gained five paisa against the European single common currency, amid fluctuations, this week.

In the international financial market, based on Reuters daily foreign currency market reports, the dollar pared some of last week’s losses and gained on the major currencies on November 13, as investors reassessed the chances of foreign central banks cutting back their US currency holdings. The yen fell after the policy chief of Japan’s ruling party said he opposed an interest-rate hike, raising doubts among traders about the pace of Japanese economic growth. Speculation last week, fuelled by Chinese officials over the threat of a wider move out of dollar-based assets by overseas central banks, drove the greenback to multi month lows against most major currencies.

Analysts, however, said the weekend had given investors enough pause to realise that while some central banks may have tweaked their currency portfolios, this was not the start of a wave of diversification to the dollar’s detriment. Earlier in the session, traders bought both the dollar and euro against the yen after policy chief of Japan’s ruling Liberal Democratic Party told he opposed lifting interest rates from 0.25 per cent, saying the impact would be “large.” That seemed to run counter to the more hawkish note sounded last week by Bank of Japan Governor, who said authorities could raise rates pre-emptively.

In New York, the dollar was up nearly 0.5 per cent on the day at 118.17 yen, while the euro was around at 151.29 yen up about 0.2 per cent from previous week close and near last week’s record high of 151.52 yen. The yen may come under further pressure if Japanese growth comes in below expectations when Japan releases its July-September growth. Economists expect it to have expanded 0.2 per cent, the same pace as in April-June. The euro was down 0.3 per cent against the dollar to $1.2802, nearly a cent off the 2-1/2-month high reached last weekend after China’s central bank chief reiterated plans to shift some of China’s $1 trillion currency reserves out of dollars.

The Australian dollar was set for its biggest daily loss against the US dollar in nearly two months, after the Reserve Bank of Australia said the country’s severe drought would hurt economic growth in 2006-07. The Australian dollar was last down 0.7 per cent at $0.7619. Sterling hit a one-month low against the euro and slipped against the dollar after data showed British factory gate inflation slowed more than expected in October. The pound fell as low as $1.9004 from pre-data levels above $1.91, having risen to the 1-1/2 year high of $1.9180 last week. Against the euro it fell to 67.41 pence, down 0.3 per cent on the day.

On November 14, the dollar ended slightly lower after US data painted a picture of slowing wholesale inflation and some consumer fatigue, while the yen benefited from robust quarterly Japanese economic growth data. The dollar recovered some ground against the euro, however, after French Prime Minister called for more collaboration among euro zone monetary authorities on managing the exchange rate. His remarks were initially interpreted by some in the market as calls for a weaker euro, as some euro zone officials fear the euro’s current strength may hurt European exports and slow growth.

The focus later returned to the US economic data due later this week, which includes consumer inflation, regional manufacturing, foreign capital inflows, and the minutes of the most recent Federal Reserve policy meeting. In New York, the euro was up 0.1 per cent at $1.2816 after having hit a session low of $1.2789 after the comments. The dollar was down 0.5 per cent at 117.54 yen, while the euro was down almost 0.4 per cent at 150.64 yen. The main pressure on the dollar came from data showing October core US producer prices fell 0.9 per cent and also from news that October retail sales fell 0.2 per cent.

Sterling hit a one-month low against the euro after weaker-than-expected British inflation data trimmed expectations that the Bank of England might raise interest rates beyond the current 5 per cent. The euro was around a one-month high at 67.63 pence. It had earlier jumped against the dollar after weaker-than-expected US producer price data, although it faded in afternoon trading. Sterling fell sharply against the dollar to a one-week low of $1.8950, down around 0.3 per cent on the day.

On November 15, the dollar rose against the yen after data showed a jump in manufacturing in New York and was steady against the euro after Federal Reserve minutes indicated inflation was still the central banks’ main concern. Earlier in the day, the New York Federal Reserve said its November manufacturing index rose to its highest level since June, confounding expectations for a decline and prompting dollar short-covering as investors trimmed bets on a near-term cut in the US interest rates.

In late trading in New York, the dollar was up 0.4 per cent against the Japanese currency at 118.07 yen. Against the euro, it was little changed, trading at $1.2827. Analysts said most moves on the dollar will be limited before the release of consumer price data for October. The greenback also hit a 3-1/2-month high against the Canadian dollar at C$1.1428 after a report showed a slump in Canadian factory shipments in September before easing back to C$1.1395, up 0.25 per cent. Sterling fell to a three week low against the dollar at $1.8838, before recovering some ground to trade at $1.8864.

On November 16, the dollar rose after economic data reinforced the view that US growth and inflation were easing at a moderate pace, and despite a dip in foreign demand for US assets. The greenback initially dipped across the board on data showing the consumer price index fell 0.5 per cent last month while the core consumer price index — which strips out volatile food and energy prices — was up just 0.1 per cent.