In the inter-bank market, mixed sentiments were observed on the opening day of the week, as the rupee lost sharply against the dollar to touch month’s lowest level attained in the third week of November.

The rupee crossed Rs81 at one point in early trading session on strong dollar demand. At the close of the day, however, the rupee/dollar parity was at Rs79.90 and Rs80.00 after the rupee lost 110 paisa on the buying counter and 115 paisa on the selling counter on December 15 against previous week’s Rs78.80 and Rs78.85. Small investors were active in buying dollars, which exerted pressure on the rupee.

The rupee continued to weaken against the dollar on the second trading day, amid rising dollar demand. It touched new lows crossing Rs81 barrier after shedding Rs1.30 against the dollar. At the close of the day the dollar was trading at Rs81.20 and Rs81.30. However, it managed to rebound strongly versus the dollar on the second trading day after recovering Rs1.80 over its overnight levels to trade at Rs79.40 and Rs79.50.

On December 18, the rupee again failed to hold its overnight strength versus the dollar and posted a five paisa decline on the buying counter while remaining unchanged on the selling counter. The dollar was at Rs79.45 and Rs79.50. On December 19, the rupee further extended its overnight strength against the dollar, which traded at Rs79.40 and 79.45 after five paisa gain in the rupee value. During the week in review, the rupee in the inter-bank market lost 60 paisa against the dollar.

In the open market, higher dollar demand by leading banks on the opening day of the week continued to exert downward pressure on the rupee, which slipped further against the dollar, shedding 40 paisa on the buying counter and 20 paisa on the selling counter to trade at Rs78.40 and Rs78.70 on December 15 as compared to last week’s Rs78.00 and Rs78.50.The dollar extended its overnight strength on the second trading day, as the rupee further shed Rs1.70 on the buying counter and

Rs1.60 paisa on the selling counter. The dollar traded at Rs80.10 and Rs80.30 after the sharp decline in rupee value on December 16. However, the rupee was quick to recover some of its overnight losses versus the dollar on December 17, as it managed to gain 160 paisa for buying and 150 paisa for selling on the third day of the week in review and traded at Rs78.50 and Rs78.80.

On December 18, the rupee managed to hold its overnight level versus the dollar on the buying counter, while losing 20 paisa on the selling counter to trade at Rs78.50 and Rs79. However, the rupee weakness versus the American currency persisted on the fifth trading day, as dollar displayed strength over the local currency, gaining 50 paisa against the rupee to trade at Rs79 and Rs79.50. This brings cumulative decline in rupee value against the dollar in the open market this week to 100 paisa.

Versus the European single common currency, the rupee was sharply lower on the opening day of the week, after shedding 220 paisa over the previous week close of Rs103.00 and Rs103.20. It traded at Rs105.20 and Rs105.40 during the day. The rupee continued its fall versus the euro on the second trading day, losing another 280 paisa over its overnight levels to trade at Rs107.90 and Rs108.20 on December 16.

The downward slide persisted on the third trading day, as the rupee lost 180 paisa on the buying counter and 145 paisa on the selling counter to trade at Rs109.50 and Rs109.65 against the euro. The rupee further extended its weakness against the euro on the fourth trading day, shedding another 250 paisa on the buying counter and 285 paisa on the selling counter. The euro was seen changing hands at Rs112.00 and 112.50 during the day.

Finally towards the close of the week on December 19, the euro lost its week long strength as the rupee managed to rebound versus the euro, sharply gaining Rs3.50 for buying and Rs3.80 for selling in single day trading. At the close of the day, the euro was changing hands at Rs108.50 and Rs108.70. As a result, the rupee in the open market managed to restrict its decline versus the European single common currency to Rs5.50 on cumulative basis during the week in review.

On the international front, the US dollar tumbled to two-month lows against the euro and a basket of currencies in New York trading on the opening day of the week on speculation the Federal Reserve will cut interest rates to near zero later this week, further eroding the greenback’s yield appeal. The euro was up 2.3 per cent at $1.3686 after climbing as high as $1.3702, the highest level since mid-October. Against the yen, the dollar fell 0.2 per cent to 90.91. But yen gains were capped on speculation that Japanese authorities could intervene to stem further currency strength.

Analysts said the dollar was starting to respond negatively to concerns about further weakness in the US economy after a run of weak data caused an exodus from risky positions and increased flight-to-quality buying in the currency. Earlier, the dollar reacted little to data showing foreigners snapped up a net $286.3 billion US securities in October as the credit crisis and economic slump triggered a record capital inflow into the country. The pound was up 2.5 per cent against the dollar at $1.5342, having earlier hit a two-week high of $1.5378

On December 16, in New York, the euro was up about three per cent at $1.4099, a 2 1/2-month high. It traded as high as $1.4144, more than five cents above its session trough of $1.3631. Versus the yen, the dollar was down 1.6 per cent to 89.06, within a striking distance to a 13-year low against the Japanese currency. Sterling traded 0.4 per cent higher at $1.5370. Earlier in the day, it fell as low as $1.5205, but recovered to match a two-week high of $1.5830.

On December 17, the euro rallied to its strongest level against the greenback. In New York trading, the euro rose to a new two-and-a-half month high at $1.4436. It was last up two per cent at $1.4383, and has rallied about 13 per cent so far this month. The dollar fell to 87.15 yen, the lowest since mid-1995. It was last down 1.7 per cent at 87.38. The dollar has lost nearly 9 percent against the yen this month and 18 per cent this quarter. Sterling fell as much as roughly two per cent to a session low of $1.5246,

On December 18, the US dollar posted its biggest one-day rise against the yen in more than a month as speculation mounted that the Japanese government may intervene to halt its currency’s advance. The yen fell a day after hitting its highest level in more than 13 years after Japanese authorities stepped up their rhetoric against a stronger currency. In late New York trading, the dollar rose 2.3 per cent to 89.29 yen, after hitting a session high at 90.02 yen. The dollar fell to 87.11 on December 17, the lowest level in more than 13 years.

The dollar also rose against the euro as some investors took profits after the single currency’s sharp gains in recent sessions. The euro last traded down 1.2 per cent at $1.4236. The euro had earlier risen to $1.4719, the highest level since September 25. Sterling hit a record low against a basket of currencies and closed in on parity versus the euro, as expectations for further hefty cuts in UK interest rates underlined the fragile state of the economy. The pound lost 1.3 percent against the dollar to $1.5300.

At the close of the week on December 19, the dollar gained a brief lift against the yen after the Bank of Japan cut interest rates but quickly gave up its gains, hurt by ongoing worries about the US economy’s outlook. The BOJ’s monetary easing pushed the dollar up roughly 30 to 40 pips against the yen to around 89.75 yen earlier. But the US unit later slipped off such levels to stand at 88.88 yen, down 0.6 percent on the day. The dollar hit a 13-year low of 87.13 yen earlier this week, after the Fed cut its interest rate policy target to a zero to 0.25 per cent range, down from a previous target of 1.0 per cent.

The euro rose 0.1 per cent against the dollar to $1.4256, having retreated from a three-month high of $1.4720 on December 18. The euro is still up over 6 percent against the dollar for the week. Against the dollar, sterling fell 0.5 per cent to $1.4977. The pound remained broadly weak, pressured by worries about the dismal outlook for the UK economy, deteriorating government finances and the prospect of interest rates falling towards zero.