July 30, 2007	Monday	Rajab 14, 1428

This week in the local currency market, the rupee moved both ways versus the American dollar but remained in a narrow range, while it continued its downturn versus the euro, amid modest fluctuations and successfully avoided breaking of Rs84 mark.

In the inter bank market, the rupee opened the week on a positive note against the dollar holding its weekend's levels almost unchanged at Rs60.39 and Rs60.40 on July 23, on the back of strong supply of dollars. The rupee continued its overnight level against dollar for the second day in a row on July 24, trading unchanged at Rs60.39 and Rs60.40.

The inter bank market registered first decline in rupee value this week on July 25, on increase in dollar demand by importers to cover increasing import bill. Consequently, the rupee shed three paisa against dollar and traded at Rs60.42 and Rs60.43 on the third day of the week in review. But improved supply of dollars on July 26 had a favourable impact on the rupee, which managed to recover its overnight losses versus the American currency, gaining three paisa to change hands at Rs.6038 and Rs60.40.

Increased demand for dollars by the importers on July 27, once again pushed the rupee value down slightly. As a result, the rupee, gave up its overnight firmness against the dollar, shedding two paisa on buying counter and one paisa on selling counter to trade at Rs60.40 and Rs60.41. During the entire week in review, the rupee in the inter bank marked showed marginal changes versus the dollar amid fluctuations. On cumulative basis it did not show any change over the previous weekend's levels.

In the open market, the rupee firmly held its weekend's level against dollar at Rs60.95 and Rs61.00 on the opening day of the week and managed to extend its overnight firmness versus the dollar on the second day of the week in review. It recovered five paisa against dollar on July 24, when the dollar was seen changing hands at Rs60.90 and Rs60.95 on good supply of dollars.

On the third trading day, however, the rupee failed to maintain its firmness over the dollar and shed two paisa to trade at Rs60.92 and Rs60.97 on July 25.

The rupee continued its downward movement versus the dollar on July 26, extending its fall by three paisa on the fourth day of trading, changing hands against the dollar at Rs60.95 and Rs61.00.

However, on the fifth day of the week in review, the rupee retained its overnight value against dollar, trading unchanged at Rs60.95 and Rs61.00 on July 27. This week, the rupee in the open market traded in a narrow range versus the dollar. At the close of the week, it did not show any change over the previous week close amid fluctuations.

Versus the European single common currency, the rupee opened the week on a negative note moving down further by three paisa on buying and four paisa on selling to trade at Rs83.84 and Rs83.94 on July 23, against previous weekend's Rs83.81 and Rs83.90. It, however, managed to recover modest gains on the second day without breaching Rs84 barrier and gained 14 paisa on July 24, when the euro traded at Rs.83.70 and Rs83.80. On July 25, the rupee firmly held its overnight levels in relation to euro, changing hands at Rs83.70 and Rs83.80.

The rupee did not move any side against the euro on July 26 and continued trading unchanged at Rs83.70 and Rs83.80 for the second consecutive day. The rupee extended its firmness against euro on July 27, when it managed to recover another 38 paisa and traded at Rs83.32 and Rs83.42, as the European single common currency weakened against the dollar in the global market. Over the week, the rupee thus managed to recover 49 paisa against the euro.

In the international financial markets, the dollar edged higher against the euro on July 23, recovering from a record low as dealers awaited economic data later in the week. Short-term investors closed their bets against the greenback after the euro failed to sustain gains beyond record highs near $1.3850, allowing the dollar to stabilise near 12-year lows against a basket of major currencies. The euro was trading at $1.3800, down 0.2 per cent on the day, after hitting an all-time high earlier in the session of $1.3846.

The New Zealand dollar surged above $0.80 for the first time since the currency was floated in 1985, strengthening to a high of $0.8058 and gaining almost one percent on the day. Sterling rose to a 26-year high versus the dollar above $2.06, before paring those gains to trade only slightly up on the day at $2.0580. Against the Swiss franc, the dollar climbed 0.5 per cent to 1.2060 francs.

The dollar slipped 0.2 per cent against the yen to 121.02 yen, having hit a six-week low around 120.80 yen earlier in the day.

On July 24, the yen surged across the board as growing turmoil in US credit markets led investors to bail out of stocks and risky trades financed by borrowing in the Japanese currency. It rallied sharply as mounting worries about the housing market drove some major US stock indexes down nearly two per cent by the close. The yen, the lowest-yielding currency in the industrialised world, has been a popular financing vehicle for speculators investing in higher-yielding assets of countries such as Australia and New Zealand through so-called carry trades.

As investors unwound some of those bets, the yen fell one per cent against the currencies of both countries. The dollar also sank to a record low against the euro and a 15-year trough against a basket of major currencies. The dollar sank 0.7 per cent to 120.25 yen after touching a two-month low of 120.03 yen. The euro jumped to a record high of $1.3853 before settling back at $1.3820, up 0.1 per cent on the day. Sterling climbed to a 26-year high of around $2.0655.

On July 25, the dollar rose sharply, posting its biggest daily gain in a year against a basket of major currencies in a technical rebound after hitting fresh record lows against the euro. Investors shrugged off an unexpectedly soft report on US existing home sales, and instead bought back the greenback after its sharp fall this week driven by growing worries about weakness in the US sub prime.

The euro fell as low as $1.3696 before settling around $1.3715, down 0.8 percent on the day and well below record highs above $1.3850 hit a day earlier.

Sterling dropped 0.5 per cent to $2.0525, more than one cent below a 26-year peak hit on July 24. The dollar was up 1 percent against the Swiss franc at 1.2135 francs. Against the yen, the dollar's gains were more modest, rising 0.4 per cent to 120.45 yen.

On July 26, the yen surged, climbing to a three-month high against the dollar, as investors spooked by growing problems in credit markets fled risky assets financed by borrowing in the low-yielding Japanese currency. Credit spreads widened, stocks fell sharply, and US benchmark Treasury yields tumbled in a flight to quality that prompted currency traders to buy back yen that had been used to buy higher-yielding currencies like sterling in carry trades

The dollar was down 1.4 percent at 118.70 yen, on track for its biggest daily decline against the Japanese currency in around five months. The euro slid 1.3 per cent to 163.20 yen after dropping to 162.90 yen earlier in the session, the lowest in more than a month. The yen's gains were most pronounced against the New Zealand dollar, which boasts the world's highest interest rates and is a darling of Japanese investors, but was dealt a blow earlier in the day after the Reserve Bank of New Zealand said that it may have raised rates enough to cool inflation.

The euro rose 0.1 per cent to $1.3740, just over one cent below a record high hit earlier in the week. The Swiss franc also rallied sharply. The US dollar fell 0.8 percent to 1.2035 francs. Dealing another blow to the dollar, US new home sales fell unexpectedly sharply in June and prices slumped. Sterling was down 0.3 percent on the day at $2.0475, having hit a 26-year peak at $2.0655 on July 24. The euro was up 0.3 per cent at 67.03 pence, recovering from previous day's five month low of 66.78 pence.

At the close of the week on July 27, the yen hit a three-month high against the dollar and a six-week high versus the euro as a sell-off in credit and stock markets forced investors to cut back on risky carry trades. But the yen quickly gave up gains, with the high-yielding Australian and New Zealand dollars rising sharply as Japanese investors took the yen's rally as an opportunity to buy foreign currencies and assets. The dollar hit a fresh three-month low against the yen at 118.02 yen in early Asian trade before recovering to around 118.95 yen.

The euro was steady from late US trading at $1.3743, off a $1.3853 record hit earlier in the week. Sterling dropped sharply versus the dollar and hit a six-week low against the yen in a broad sell-off of high-yielding currencies, as investors cut some of their more stretched foreign exchange positions. It had fallen 0.8 percent on the day to $2.0303, well away from a 26-year peak hit at $2.0655 earlier this week. Against the yen, it hit a six-week low of 240.60 yen. The euro was up 0.1 per cent at 67.25 pence.