January 15, 2007	Monday	Zilhaj 24, 1427

THE local currency market witnessed mixed sentiments versus the American and European currencies in the first week of the New Year, with the rupee trading in a narrow range. The week commenced on a negative note as strong demand for dollar pushed the rupee down to Rs61 mark in the inter bank market changing hands at Rs.60.98 and Rs61 on January 8, from Rs60.97 and Rs60.99 at the close of last week.

On January 9, the rupee/dollar parity traded in a tight range, amid modest trading. During the day, the rupee lost just one paisa on the buying counter, as it traded at Rs 60.99 and Rs61.00. Firmness in the rupee/dollar parity prevailed in the inter bank market on the third day of the week in review, as balanced supply and demand of dollar did not allow the rupee to fluctuate on January 10, when dollar was seen trading at its overnight levels.

The rupee continued its upward trend for the second day in a row posting fresh gains of three paisa against the dollar, to trade at Rs60.96 and Rs60.97 helped by exporters dollar selling on January 11. On January 12, the rupee made further overnight gains against the dollar in the interbank market as it picked up three paisa on the buying counter and two paisa on selling counter and traded at Rs60.93 and Rs60.95.

Exporters continued selling of dollars supported the rupee for the second consecutive day. As a result, during the week in review, the rupee restricted any sharp decline, losing only four paisa versus the dollar in the inter bank market.

In the open market, the rupee extended its overnight slide versus the dollar. It shed 11paisa on the buying counter and 12 paisa on selling counter to trade at Rs60.98 and Rs.6105 on the first day of trading, amid dollar's rising demand, as against the previous week close of Rs.60.87 and Rs.60.93. On the second day of trading, the rupee managed to recover its overnight losses versus the US currency and gained ten paisa for buying and eight poise for selling to trade at Rs60.88 and Rs60.97 on increased dollar supply.

On the third day of the week in review, the rupee/ dollar parity traded unchanged at Rs60.87 and Rs60.97. However, on the following day the rupee failed to hold ground versus the dollar, as it shed 3paisa on buying counter and 4 paisa on selling counter to trade at Rs 60.90 and Rs61.00 on January 11. Downward trend persisted in the rupee/dollar parity on the fifth day of trading. The rupee lost another five poise against the dollar on January 12, when the dollar was seen changing hands at Rs60.95 and Rs61.05. This week, the rupee in the open market lost 8paisa on the buying counter and 12paisa on the selling counter.

Versus the euro, the rupee lost 25paisa and traded at Rs78.85 and Rs78.95 on January 8, as compared to last week close of Rs78.60 and Rs78.70. The rupee extended its weakness versus the euro for the second successive day of the week in review. It traded at Rs78.95 and Rs79.05 on January 9 after shedding 10paisa more over its previous day’s close.

Versus the euro the rupee managed to reverse the trend on the third trading day as it gained 50paisa and traded at Rs78.50 and Rs78.60 on January 10. On January 11, the rupee extended its overnight weakness against the European currency, posting fresh losses of 25paisa to change hands at Rs78.75 and Rs78.85.

On January 12, the rupee made sharp gains over the euro, recovering 52paisa to trade at Rs78.21 and Rs78.31. As compared to the previous week, the rupee this week managed to gain 39paisa over the euro due to continued weakness of the European currency in the international market.

In the international financial market, the dollar fell from six-week highs against the euro on the opening day of the week in review, amid speculation last week's rally on the back of robust US employment data was overdone. The dollar also fell against the yen.

On January 9, the dollar rallied near two month-highs against the amid investors' expectations that a possible rate hike by the Bank of Japan will fail to boost demand for the Japanese currency. A sharp fall in crude oil futures helped the dollar post gains against the euro and Swiss franc. Analysts said the drop in oil would probably help shrink the US trade deficit and bolster consumer spending.

Sterling rallied broadly after strong UK data rekindled speculation that British interest rates may rise further, although perhaps not as soon as this week, when the Bank of England meets to discuss policy. The pound was last up 0.1 percent at $1.9399, having touched an intraday high at $1.9456, after firm data on British retail sales and employment buoyed sentiment ahead of the Bank of England meeting.

On January 10, the dollar rallied broadly after a report showing the US trade gap narrowed in November for the third month in a row made an interest rate cut by the Federal Reserve early in 2007 seem less likely. News that the US trade deficit shrank to its smallest since July 2005 helped the dollar rise for the fifth trading session in the past six against a basket of major currencies to close at its highest since November 22.

The euro was off 0.5 per cent at $1.2936, down for a second day in a row, although losses were limited by investor caution ahead of the European Central Bank's policy meeting. The dollar showed little reaction to earlier comments by Chicago Federal Reserve President on the outlook for the economy, traders said. The dollar was up 0.20 per cent against the yen at 119.63 yen.

Sterling was last down 0.4 per cent on the day at $1.9325, but was up versus the euro after data showed the UK trade deficit was wider than expected in November. The euro last traded down 0.10 percent at 66.94 pence. The pound was buying $1.9360, down slightly on the day. The euro hit a two-week low at 66.87 pence before the trade data, but then recovered to around 66.99 pence.

On January 11, the dollar rose to its highest since late November against the euro as demand for the European currency fell after the European Central Bank suggested it may not raise rates again next month as some had anticipated. The euro also dropped sharply against sterling, which rallied against several currencies after a surprise interest rate increase by the Bank of England. The euro was at $1.2889 in New York, down about 0.4 per cent on the day, and pared some gains against the yen to reach 155.37 yen, still up 0.4 percent on the day.

Meanwhile, the dollar also rallied against the yen, reaching its highest level in over a year, above 120.00 yen and on course for its largest daily increase in a month. The yen has fallen against every one of its G7 peers except the Canadian dollar in the last three months, having lost two perc ent against the US dollar and 3.6 per cent against the euro. Sterling broke a 10-year high on a trade-weighted basis and rose to 18-month highs against the euro after the Bank of England surprised markets with an increase in UK rates to 5.25 percent.

In London, the euro was up half a percent at $1.2992. The yen, meanwhile, fell half a percent to 13-month lows beyond the key 120 level against the dollar and dropped one percent on the day against the euro as markets cut back expectations for a rate hike in Japan next week from the current 0.25 per cent. The pound was last at 66.26 pence as the euro shed almost 1 percent, and rose 0.6 per cent against the dollar to $1.9446.

At the close of the week on January 12, The dollar hit a 13-month peak against the yen and a 1-1/2-month high versus the euro.

The euro extended its slide a day after European Central Bank President failed to signal a February rate rise in comments made after a policy meeting. The ECB left rates at 3.50 percent at the meeting, as expected, but many market players had hoped for a clear signal for a rate rise next month.

The euro edged up to $1.2900 after touching a 1-1/2-month low of $1.2877. The dollar reached a 13-month peak of 120.74 yen before easing to 120.55 yen little changed on the day.

The US currency surged on January 11 past the key 120 yen level for the first time since December 2005, despite the possibility that the Bank of Japan could raise the overnight call rate to a decade-high 0.5 percent from 0.25 per cent next week. Sterling held steady around $1.9465. The pound rallied to a 10-year high on a trade-weighted basis and 18-month highs against the euro on January 11 as the Bank of England unexpectedly lift interest rates to 5.25 percent, matching the US funds rate.

In London, Sterling hit its highest level against the euro since August 2004, as the pound continued to rise after the Bank of England's surprise decision to hike rates to 5.25 per cent.

The dollar was trading at eight-week highs of 1.2506 francs and was at 85.19 against an index of currencies, near seven-week highs of 85.39 struck earlier. The euro was steady on the day at $1.2906 after touching a 1-1/2-month low under $1.2880 earlier in the day. The euro hit an 18-month low against sterling for a second straight day after a surprise rate hike from the Bank of England, to 5.25 per cent. It hit a 13-month peak against the yen at 120.73, before easing to 120.38 yen.