July 23, 2007	Monday	Rajab 07, 1428

Local currency market observed mixed sentiments versus the American currency this week, as the rupee moved both ways in narrow ranges against the dollar, though demand for dollar existed in the market.

The rupee, however, made some sharp negative moves versus the European single common currency and was seen attempting to break Rs84 mark in last trading sessions on gaining global strength versus leading world currencies this week.

In the inter-bank market, the rupee shed one paisa on the buying counter and another two paisa on the selling counter opening the week on July 16 at Rs60.37 and Rs60.39 against the dollar. The dollar had closed last week at Rs60.36 and Rs60.37. On July 17, the rupee managed to hold its overnight levels due to dollars inflow, which did not allow the rupee to move either ways thereby changing hands at its previous day's level of Rs60.37 and Rs60.39.

However higher importers' demand for dollars on July 18 exerted downward pressure on the rupee for the second day in a row, shedding three paisa against the dollar to settle at Rs60.40 and Rs60.42. Falling trend persisted for the third consecutive day, as the rupee extended its decline over the dollar and lost four paisa more to trade at Rs60.44 and Rs60.46 after different banks reportedly bought nearly $30-35 million to meet the clients demand on July 19.

Falling trend in the rupee/dollar parity reversed on July 20, as the rupee managed to recover five paisa against dollar in the inter bank market, where it traded at Rs60.39 and Rs60.41. During the week in review, the rupee in the inter bank market showed a mixed trend trading in a narrow range versus the American dollar. It lost only two paisa on cumulative basis this week.

In the open market, the rupee commenced the week on a positive note, as it gained five paisa against dollar for buying and another eight paisa for selling to trade at Rs60.95 and Rs61.00 on July 16, after closing previous week at Rs61.00 and Rs61.08. The rupee continued its upward trend versus the dollar on July 17, when it managed to pick up five paisa for buying and one paisa for selling, changing hands at Rs60.90 at Rs60.99.

On July 18, the rupee held its overnight firmness against dollar for buying, but managed to gain four paisa for selling and traded at Rs60.90 and Rs60.95. It, however, retained its overnight levels on July 19 and traded unchanged against the dollar at Rs60.90 and Rs60.95. On July 20, the rupee failed to hold its firmness and shed five paisa against the dollar, trading at Rs60.90 and Rs61.95. Over the week, the rupee in the open market managed to recover ten paisa against the dollar.

Against the European single common currency, the rupee shed six paisa on the week's opening day, changing hands at Rs83.55 and Rs83.65 on July 16, against previous weekend's Rs83.49 and Rs83.59. On July 17, the rupee, however, managed to recover 10 paisa against euro, which was quoted at Rs83.45 and Rs.83.55 at close. The rupee was unable to hold its overnight firmness over the European currency on July 18, when it lost nearly 25 paisa against the euro and traded at Rs83.70 and Rs83.80.

On July 19, the rupee recovered 20 paisa against euro to trade at Rs83.50 and Rs83.60. Finally it assumed downtrend and lost 15 paisa against euro on July 20, when it was seen changing hands at Rs83.65 and Rs83.75. During the entire week, the rupee continued its sharp declines amid fluctuations and lost 16 paisa versus the European single common currency.

In the international financial markets, the dollar fell to multiyear lows against higher-yielding currencies on the opening day of the week and remained near a record low versus the euro as investors braced for data expected to show declines in home construction and inflation. Weakness in those reports would provide fresh incentives for dollar bears, which punished the greenback last week as a deepening housing slump and a decline in retail sales further dented the case for higher US interest rates this year.

On July 16, the euro was changing hands at $1.3780, near a record peak of $1.3813 hit last weekend, while sterling hit a 26-year peak at $2.0405 before easing to $2.0370, still up 0.1 per cent from previous week close. The dollar was up 0.1 per cent at 121.78 yen, recovering earlier losses after earthquakes in north-western Japan sparked some yen selling. Sterling extended gains against a broadly weak dollar trading above $2.04 for the first time in 26 years. The pound rose as high as $2.0405.

On July 17, the dollar edged up against the yen after a government report showed foreign investors bought a record amount of US securities in May. A slightly larger-than-expected advance in producer prices last month also provided mild support for the greenback, which helped to ease some concerns that the Federal Reserve will soon have to cut interest rates. However, the dollar failed to get much traction against the euro or sterling.

Net overall capital inflows into the US rose to $105.9 billion in May, with corporate bond and equities purchases driving long-term investments to a record high, the Treasury department said. That was enough to cover a US trade shortfall of $60 billion in May. A 0.3 per cent gain in core producer prices, which remove food and energy costs, also sparked dollar-buying against the low-yielding yen. The dollar was up 0.4 per cent at 122.33 yen, while the euro was up 0.1 per cent at $1.3780, not far from a lifetime high of $1.3813 hit last week.

The euro was also up 0.4 per cent at 168.58 yen, gaining after European Central Bank council member said euro-zone inflation risks are rising, making another interest rate increase likely. Sterling hit a new 26-year high against the dollar after stronger-than-expected UK inflation data boosted expectations of higher interest rates. The pound had gained 0.5 per cent to $2.0455, after trading as high as $2.0476 earlier in the day, a level not seen in 26 years.

On July 18, the dollar fell against most major currencies and stayed within sight of a record low against the euro after Federal Reserve Chairman said US housing market woes could worsen. The euro traded at $1.3790, little changed from previous day close and near an all-time high above $1.3830 touched overnight. The dollar slipped to 121.95 yen, down 0.2 per cent. Sterling was last up 0.3 per cent at 2.0524 after earlier hitting a 26-year peak at $2.0548.

On July 19, the dollar was little changed against the euro, trading just above an all-time low, as concerns about the US housing market and its impact on consumers continued to sour investors on the greenback. A second day of testimony from Federal Reserve Chairman provided added ammunition for dollar bears when he told the Senate Banking Committee that losses on sub-prime mortgages could hit $100 billion and curb consumer spending.

Markets interpreted that to mean the Fed probably won't cut benchmark interest rates this year despite a deepening housing slump but that hasn't provided much of a boost for the dollar. The euro traded at $1.3798, unchanged from the prior session and below a session peak of $1.3831. It hit a lifetime high at $1.3834 a day earlier. But both the dollar and euro edged up against the yen as investors continued to shun the low-yielding Japanese currency in search of higher returns elsewhere. Sterling weakened against the dollar. The pound was down 0.2 per cent versus the dollar at $2.0488.

At the close of the week on July 20, the dollar hovered near a record low against the euro on lingering worries about the US housing market, while the Australian and New Zealand dollars gained as investors flocked to higher-yielding currencies. The dollar limped after Federal Reserve Chairman said that losses on sub-prime loans - those to customers with poor credit - could hit $100 billion and threaten consumer spending.

High-yielding currencies gained, with the New Zealand dollar hitting a 22-year high against the dollar and a 21-year high against the yen, while the Australian dollar scaled an 18-year peak against the dollar and a 16-year peak against the yen.

The euro was steady at $1.3799, within range of a record high of $1.3834 hit earlier this week, when the dollar fell broadly on news that the value of two Bear Stearns hedge funds that bet heavily on sub-prime loans had evaporated.

The dollar inched up slightly to 122.22 yen, supported by talk that some newly launched Japanese investment trusts targeting overseas assets might sell the yen to buy higher-yielding currencies. Sterling was up 0.3 percent against the dollar at $2.0563, trading as high as $2.0568, a level not seen since January 1981. The New Zealand dollar climbed to as high as $0.7958, a post-float 22-year high. The Australian dollar rose as high as $0.8814, its highest level in 18 years.