April 23, 2007	Monday	Rabi-us-Sani 05, 1428

In the interbank market, the rupee-dollar parity commenced the week on a stable note, as dollar supply was sufficient to meet the demand on April 16. The rupee traded unchanged at its last weekend’s levels of Rs60.66 and Rs60.67.

The rupee unable to hold ground versus the dollar on the second day of the week, drifted lower by four paisa on the buying counter and another three paisa on selling counter, changing hands at Rs60.70 and Rs60.68 on April 17.

On April 18, the rupee marginally recovered two paisa for buying and also one paisa for selling to trade at and at Rs60.70 and Rs60.68 on the third day on easy dollar supply. On April 19, the rupee inched up slightly on balanced demand and supply position, gaining three paisa on buying and one paisa on selling in the interbank market to trade at Rs60.67 and Rs60.69 against the dollar on the fourth day of trading.

Easy supply of dollars on April 20, helped the rupee to hold its overnight levels against the greenback. As a result, firm trend was seen in the inter bank market. The rupee/dollar parity did not show any change on the fifth day. The rupee continued to be traded at its overnight levels of Rs60.67 and Rs60.69 against the dollar for the second successive day. During the week in review, the rupee in the inter bank market lost two paisa versus the dollar.

In the open market, the rupee shed five paisa versus the dollar on the opening day of the week in review, changing hands at Rs60.75 and Rs60.85 against previous week close of Rs60.70 and Rs60.80. The rupee maintained its overnight levels against dollar, changing hands at Rs60.75 and Rs60.85 in the open market on April 17.

On the third day of the week in review, the rupee managed to post fresh gain of five paisa against the dollar, which traded at Rs60.70 and Rs60.80. The rupee shed two paisa against the dollar for buying but it maintained its overnight level for selling to trade at Rs60.72 and Rs60.80 on April 19. The rupee managed to hold on to its overnight levels against the dollar on April 20,which was quoted at Rs60.72 and Rs.60.80 in the open market on the fifth day of trading. This week, the rupee in the open market lost two paisa on buying counter but showed no change against the dollar on the selling counter amid fluctuations.

The single European currency strengthened in the local trade on the first trading day of the week after posting fresh gains in the global markets. The rupee dipped to new lows as it lost 23 paisa in relation to the euro on April 16, when it traded at Rs82.04 and Rs82.14, as against Rs81.81 and Rs81.91 at the close of previous week. The rupee, however, managed to gain 12 paisa against the European single common currency on the second trading day, to trade at Rs81.92 and Rs82.02, as euro lost versus major currencies in the world market on April 17.

Against the euro, the rupee surrendered its overnight gains on April 19, as the single European currency managed to recover 27 paisa and traded at Rs82.19 and Rs82.29 for selling on the back of overseas gains on the third trading day of the week. On the fifth trading day, the rupee extended its overnight fall against euro and shed 15 paisa, changing hands at Rs82.34 and Rs82.39 on April 20. Over the past week, the rupee lost 53 paisa for buying and 58 paisa for selling against the European single common currency.

On the international front, the yen plummeted to record lows against the euro and fell to its lowest against the dollar since February after the Group of Seven passed over the issue of the Japanese currency's weakness on April 16. Investors' appetite for high-yielding currencies also helped propel sterling to a near-15-year peak above $1.99 as strong British data reinforced the view that the Bank of England will raise interest rates again as soon as next month.

The euro rose to a record high of around 162.43 yen earlier, before trimming gains to 162.07 yen by late trading in New York, still up 0.5 per cent on the day.

The dollar rose to as high as 119.87 yen, its highest since late February, before trading last at 119.72 yen, up 0.4 per cent. The euro hit a two-year high around $1.3578 but pared gains to $1.3533, flat on the day. The Australian dollar hit a 10-year high of 99.90 yen and a 17-year peak at $0.8359.

Sterling, meanwhile, rallied to as high as $1.9940, its highest since September 1992, after strong producer prices and housing data cemented expectations that British rates will overtake US rates as soon as next month. The British pound traded back down to $1.9897, still up 0.2 per cent from the previous week close.

The New Zealand dollar, which at 7.5 per cent carries the highest benchmark interest rate in the industrialised world, hit a two-year high of $0.7413 and a roughly 17-year peak at 88.79 yen.

On April 17, the dollar dropped to a two-year low against the euro after data showed US core consumer prices rose less than expected in March, bolstering expectations the Federal Reserve may be more inclined to cut interest rates this year. The dollar also fell against the yen and sterling, which rose above $2 for the first time in almost 15 years as UK inflation data cemented expectations the Bank of England will raise rates next month.

In late trading, the euro was up 0.2 per cent on the day at $1.3564, after touching a two-year high of $1.3595, less than one cent below a record high of $1.3670. The dollar sold off after data showed US core inflation grew just 0.1 per cent in March, below market forecasts for a rise of 0.2 per cent. Against the yen, the dollar fell 0.7 percent to 118.88 yen. The euro dipped 0.4 per cent to 161.25 yen.

On April 18, the dollar fell to a 26-year low against the British pound and traded near a record low versus the euro, as expectations for US interest rate cuts contrasted with prospects for monetary tightening in Europe and Japan. The greenback later turned slightly higher against the pound, as investors booked profits on sterling's recent gains. For the rest of the week, analysts expect dollar weakness to remain the dominant theme since there are no major market-moving US economic data due.

The pound rose above $2 on April 17 for the first time since 1992, but on April 18, scaled levels last seen in June 1981. In that year, the pound had fallen sharply from a peak above $2.40 hit in January 1981. Sterling rose as high as $2.0133. It last traded at $2.0064, slightly lower on the day. The pound had risen as high as $2.0133, up 0.2 per cent on the day, before erasing gains to $2.0067 as the dollar recovered ground.

The euro also slowly approached historic highs versus the dollar, rising above $1.3600 for the first time in two years and coming within 60 ticks of record peaks set in December 2004. In New York, the euro was up 0.3 per cent at $1.3605, but down from its peak of $1.3616. Demand for the dollar dwindled after previous day’s data showed tamer-than-expected US consumer price inflation for March, excluding food and energy.

On April 19, the yen climbed as worries about a possible near-term interest rate hike in China to slow its accelerating economy prompted investors to unwind trades funded by low rates in the Japanese currency. Any slowdown in China as a result of higher rates could crimp demand for emerging market and other risky assets that have supported the carry trade, a strategy in which investors borrow cheaply to buy higher-yielding assets or currencies.

The yen trimmed earlier gains against high-yielding currencies such as the US, Australian and New Zealand dollars but most analysts saw that as a temporary setback for the yen. In early trading, the dollar recovered from lows of 117.62 yen to trade at 118.39. The euro was flat at $1.3599 after notching a two-year high of $1.3619 earlier in the day and still in sight of the record high at $1.3670 set in December 2004. Sterling was down 0.4 percent at $2.0009 after hitting a 26-year peak on April 18.

At the close of the week on April 20, The yen slipped as Asian stocks markets rebounded from a sell-off a day earlier on worries about an overheating Chinese economy, calming fears that investors could rush to unwind carry trades. The dollar rose to 118.66 yen up 0.2 per cent for the day, recovering from 117.61 yen hit a day earlier. The single currency hit a two-year high of $1.3629 against the dollar in early Asian trade before retreating to $1.3615 as expectations that the European Central Bank will boost interest rates in the coming months supported the single currency.

Sterling briefly dipped below $2 after data showed UK retail sales growth eased in March, but quickly bounced back as figures did nothing to alter expectations for higher British interest rates. Retail sales rose 0.3 per cent in March, less than the forecast for a 0.5 per cent rise. The pound was up slightly on the day at $2.0040, quickly erasing losses after the data. It hit the 26-year peak of $2.0133 hit earlier this week.