March 17, 2008	Monday	Rabi-ul-Awwal 8, 1429

Strong demand for dollars by importers because of costlier payments after the higher oil prices in the international market has made the rupee vulnerable against the dollar and European single common currency. Currently the oil prices are hitting a record near $110 in the Asian trading. Gold prices have also touched record highs. Most currency experts fear that the rupee will continue to remain under pressure and weaken further against leading currencies in coming weeks.

The rupee weakness versus the dollar persisted in the inter-bank market this week. The rupee commenced the week on a dismal note as mounting demand for dollar continued to exert downward pressure on the rupee. On March 10, the rupee suffered fresh losses against the US currency. The rupee/dollar parity shed 12 paisa on the buying counter and another 14 paisa on the selling counter, changing hands at Rs62.78 and Rs62.82 against the previous week close of Rs62.66 and Rs62.68.

The rupee attempted to recover some of its overnight losses against the dollar on the second trading day of the week in review moving both ways.

While it managed to pick up one paisa on the selling counter, it further slid by one paisa on the buying counter to trade at Rs62.79 and Rs62.81 against the dollar on March 11.

However, higher dollar demand from the importers to cover up their payment needs pushed the rupee down further against the dollar. The rupee posted fresh losses of 7 paisa and traded at Rs62.86 and Rs62.88 on March 12.

Modest improvement in dollar supplies on March 13 helped the rupee to come out from downward pressure against the dollar in the inter-bank market, gaining 12 paisa to trade at Rs62.74 and Rs62.76.

However, the rupee failed to hold its overnight firmness on March 14 as high demand for dollar to meet import payments requirement exerted downward pressure on the rupee, which shed four paisa and traded at Rs62.78 and Rs62.80 against the dollar. This brings cumulative fall in the inter bank rupee value this week to 12 paisa.

In the open market, the rupee shed five paisa in terms of dollar on the opening day of the week and traded at Rs62.75 and Rs62.85 against previous week close of Rs62.70 and Rs62.80. The rupee, however, failed to hold its overnight firmness versus the dollar on March 11, when it shed 10 paisa, changing hands at Rs62.85 and Rs62.95. It further extended its overnight decline against the dollar on March 12, losing 7 paisa on the buying counter and five paisa on the selling counter to close the day at Rs62.92 and Rs63.00.

On March 13, the rupee continued its decline versus the dollar, posting fresh losses of three paisa at Rs62.95 and Rs63.05. On March 14, however, the rupee managed to recover its overnight losses by gaining five paisa against the dollar. At close, the dollar was at Rs62.90 and Rs63.00. During the entire week in review, the rupee in the open market suffered cumulative loss of 25 paisa against the dollar.

Against the European single common currency, the rupee overnight weakness persisted on March 10, as it sharply shed 20 paisa over the previous week end’s Rs95.80 and Rs95.90 touching new lows to trade at Rs96.00 and Rs96.10 on the first trading day of the week. The rupee continued unchanged versus euro on the second day of trading but shed 10 paisa more on the third day trading at Rs62.86 and Rs62.88.

On the fourth trading day of the week, the rupee touched record lows against the euro after falling sharply by Rs1.35 to trade at Rs97.55 and Rs97.65 amid modest trading. However, it managed to recover five paisa on the fifth day and traded at Rs97.50 and Rs97.60 on March 14. This week, the rupee posted a cumulative loss of Rs1.70 against the European single common currency.

On the international front, the yen and Swiss franc firmed broadly as US stocks fell on credit-related worries on the week’s opening day, prompting investors to reduce exposure to risky assets and unwind trades funded by the Japanese and Swiss currencies’ low rates.

The yen approached eight-year highs against the dollar while the Swiss franc rose to roughly two-year peaks against the euro and was within striking distance of its record high against the greenback.

The dollar, meanwhile, steadied against the euro after Europe’s top monetary officials expressed concern about excessive movements in currency exchange rates.

On March 10, the greenback hit a session low of 101.57 yen in New York late trade, just shy of last weekend’s eight-year low around 101.40 yen, before edging back to 101.75 yen, down 0.9 per cent on the day. The dollar dropped 0.6 per cent against the Swiss franc to 1.0192 after hitting a record low at 1.0136 Swiss francs last week close. Against the euro, the dollar traded at $1.5347, slightly up from last weekend levels. The euro had hit a record peak against the dollar on March 8 at around $1.5459. The pound was steady at $2.0161, having earlier risen as high as $2.0220.

On March 11, the dollar surged against the yen and Swiss franc, on pace for its largest daily gain in six and a half months and more than three years respectively, after the Fed said it would lend primary dealers up to $200 billion in Treasury securities and allow them to use agency and mortgage debt as collateral. The dollar also rebounded from a record low against the euro following the announcement of the liquidity measures, which will be co-ordinated with other central banks.

In New York, the dollar hit a session high of 103.54 yen, well off an eight-year low around 101.40 hit last week. It last traded at 103.35 yen, up 1.6 percent on the day, its best daily performance since late August 2007. The euro retreated from an all-time high just short of $1.55 earlier in the session and fell as low as $1.5283 before edging back to $1.5316, down 0.1 per cent from previous day’s close. The dollar also rose 1.3 percent to 1.0333 Swiss francs.

High-yielding currencies rallied sharply against the dollar and yen, with the New Zealand dollar rising 1.6 percent to US $0.8017. Sterling eased 0.3 per cent to $2.0027, tracking a sharp retreat in euro/dollar from record highs set earlier in the day.

On March 12, the dollar plunged to a record low against the euro and a basket of currencies amid uncertainty about the long-term impact of the Federal Reserve’s recent efforts to inject money into cash-starved credit markets.

The euro hit a record peak of $1.5559, according to Reuters data, before easing to around $1.5552, up 1.5 per cent from a day earlier. It was the largest daily gain for the euro in more than two years.

The euro has risen 6.5 per cent against the dollar so far this year and is up 18 percent over the past 12 months. Against the Swiss franc, it was 1.9 percent weaker at 1.0143 francs, just shy of a record low at 1.0136. Sterling gained ground against the dollar. It was up 0.6 per cent on the day at $2.0189.

On March 13, the dollar plunged below 100 yen for the first time in more than a decade and hit a fresh lifetime low against the euro as worries deepened on Wall Street that the United States had entered a recession. The dollar traded near parity with the Swiss franc, dropping to a record trough, as data showed a surprising drop in US retail sales, which heightened concern that American consumers were cutting back on spending. The dollar fell to 99.77 yen, its lowest level since October 1995, before easing to 100.67 yen, 0.8 per cent weaker on the day.

The euro hit a fresh lifetime high at $1.5624, before trading back down to $1.5614, up 0.2 per cent on the day. The dollar fell 0.3 per cent to 1.0104 Swiss francs after plumbing a record low of 1.0047 francs. Sterling rose against the dollar on a wave of dollar selling that pushed it to historic lows against many currencies on the view the Federal Reserve’s recent actions to ease market strains won’t work. But the pound emerged as the biggest gainer against the dollar. It was up 0.2 per cent on the day at $2.0310, having traded as high as $2.0391 earlier.

At the close of the week on March 14, the dollar hit a record low against the euro and fell back towards a 12-year low versus the yen. It fell 0.4 per cent from late US trade to 100.30 yen and sank as low as 99.84 yen close to the 12-year low of 99.77 yen hit on the previous day. So far this year, the dollar has shed 10 per cent against the yen. Sterling edged up to three-month highs versus a dollar battered by news of trouble at US banking heavyweight Bear Stearns. It rose as high as $2.0397, its strongest since mid-December.