The rupee/dollar parity showed an erratic trend this week. In the inter-bank market heavy payments by some local and foreign banks exerted downward pressure on the parity, which opened the week on a dismal note.

On December 10, the rupee slipped 10 paisa against the dollar, which traded at Rs60.65 and Rs60.70 versus the previous weekend close of Rs60.55 and Rs60.60. Heavy dollar-buying by banks continued on December 11, the rupee remained under pressure and lost another 10 paisa versus the dollar over the overnight level, trading at Rs60.75 and Rs60.80. However it showed marginal improvement on December 12, when slight improvement in dollar supply helped the rupee to recover some of its lost ground, amid persistent dollar demand.

The dollar was quoted at Rs60.73 and Rs60.78 on December 12, in the inter-bank market, reflecting only 2 paisa gain over the overnight level, but 18 paisa down against the previous week’s close. Continued demand for dollar pushed the rupee further down on December 13, shedding 7 paisa for buying and 5 paisa for selling. The dollar was trading at Rs60.80 and Rs60.83 at close. Sufficient supply of dollar however, limited the rupee fall. During the week as a whole the rupee was lower by 25 paisa for buying and 23 paisa for selling versus the previous weekend close of Rs60.55 and Rs60.60 in the inter-bank market.

Against other major currencies, the rupee weakened at the inter-bank forex counter against all the major currencies. The rupee suffered fresh losses against the British pound, euro, German mark, Canadian, Australian, New Zealand, Hong Kong and Singapore dollars, Swiss, French and Belgian francs, Dutch guilder, Swedish krona, Danish and Norwegian krones, Italian lira, Austrian schilling, Spanish peseta, Chinese yuan, Malaysian ringgit, Kuwaiti dinar, Saudi and Qatari riyals, and the UAE dirham. The Japanese yen was the only currency against which the rupee remained strong during the week.

In kerb dealings, the rupee followed inter-bank market trend. It opened the week on December 10, on a negative note losing 5 paisa against the dollar to trade at Rs60.65 and Rs60.75, due to rise in demand for dollar. As demand persisted on December 11, the rupee extended sharp losses against the dollar which traded at Rs60.85 and Rs60.95, reflecting 20 paisa fall from the previous day’s level.

Improved dollar supply on December 12, amid persistent demand, helped the rupee to recover 10 paisa trading at Rs60.75 and Rs60.85. Though heavy demand for dollar by some banks for making payments persisted on December 13, sufficient supply of dollars restricted the fall in rupee in the kerb. Instead there was a gain of 15 paisa for buying and 5 paisa on selling. As a result the dollar traded at Rs60.60 and Rs60.80 in the kerb, 20 paisa below for buying and 3 paisa less on selling against inter-bank rates but up 5 paisa for buying and 10 paisa for selling over the previous weekend close.

Heavy demand by banks for meeting oil payments has been the main factor causing rupee losses this week. However, most analysts expect the rupee to revert to its previous trend next week, regaining its lost strength over the dollar.

On the international front, the dollar briefly touched a five-month high against the yen in Tokyo on December 10, before pausing for breath, but it remains within striking distance of the year’s peaks. The yen was under pressure on other crosses as well, with the sterling breaking above 180 yen for first time since April. The euro was subdued against the dollar at $0.8908/13, having retreated from $0.8950 of previous weekend close despite a grim US payrolls report. The dollar had settled back at 125.65/66 yen after an early spike to 125.87 ran into Japanese exporter hedging and profit-taking. The next major chart target is a 126.14 peak from July 6. A break thee would take the dollar to levels not seen since April, when it marked highs for the year around 126.84.

In London, the pound ended little changed against the euro and the dollar as market activity thinned out ahead of this week’s US Federal Reserve interest rate decision. Sterling showed almost no reaction to softer than expected data on producer prices. Factory gate prices fell 0.4 per cent in November, twice the rate of decline expected, while input prices fell by 1.0 per cent. The pound was trading around $1.4323, roughly the same as previous weekend and at 61.93 pence per euro, also little changed from last week. Sterling also hit eight-month highs against a broadly weaker yen.

In New York, the yen fell to eight-month lows against the dollar and the euro as a new round of grim data from Japan showed the country’s fourth recession in the past decade is deepening. The yen came within a whisker of its 2001 low against the dollar, but the greenback was mixed against other major currencies in muted trade. After the dollar’s broad run-up against the yen, a short bout of profit-taking set in during the US trading, as activity was also limited with no major economic reports due out in the United States. In late New York trade, the dollar was back around 126.10 yen, up 0.48 per cent on the day. The euro perched near eight-month high of 112.26 yen compared with New York close at 111.61 yen. The dollar fell just slightly against the euro to 88.99 cents.

On December 11, the dollar held steady against the dollar and the yen after the US Federal Reserve cut interest rates by 25 basis points, as had been widely expected. The dollar was unchanged against the Japanese currency around 126.10 yen. The euro was steady around 89.10 cents against the dollar. The greenback was held in a tight range in Tokyo trade, and was steady around 125.91/99 yen in late-afternoon trade, below an eight-month high of 126.39 hit offshore. But many said the dollar could soon test its year-to-date high at 126.82. The euro was little changed against the yen, standing at around 112.17/29 in later-afternoon trade, compared with an overnight high around 112.30. Against the dollar, the euro was also quiet at 89/07/14 cents, virtually unchanged from its late New York levels.

Sterling held firm against the euro and the dollar in London but was stuck in a narrow range as traders remained reluctant to take fresh positions ahead of the US Federal Reserve’s interest rate decision. The pound had also been supported by news that the annual rate of targeted inflation, fell much sharper than expected to 1.8 per cent in November from 2.3 per cent in October and compared with market expectations of 2.1 per cent. The pound was trading at $1.4565, slightly higher than the previous day’s New York close and around 62 pence per euro, also slightly higher than December 10 level.

In Tokyo, the euro shouldered its way to the front of the pack in Tokyo reaching an eight-month peak on the yen and escaping a three-month downtrend against the dollar. Traders said the single currency found encouragement in Wall Street’s subdued reaction to the latest Federal Reserve rate cut. The euro run ahead to a 112.92 high on the yen, its best level since early April. It was forced to pause there by option-related offers defending 113.00 but analysts said the break of the 112.60 barrier augured well for a test of resistance at the 113.31 high from April 9, the rise against the yen helped the euro hop higher on the dollar with a break of a major downtrend line at $0.8940/50 tripping stop loss buying up to 40.8973. The dollar’s pullback extended to the yen where it faded to 125.75 yen from 126.05 late in New York on December 11 and eight-month top of 126.38 on December 10.

In London, the pound was little moved against the euro brushing aside a small rise in the UK jobless count while edging slightly higher against a broadly weaker dollar to around $1.4425. Against the euro, the pound was hovering around the 62.00 pencemark, a level which it has failed to decisively break below for at least three weeks.

In New York, the yen resumed its month-long slide hitting eight-month lows against the dollar and euro after weak data on Japanese business sentiment and reports US officials support a weaker yen both undermined Japan’s currency. The selling of yen for euros spilled into the euro/dollar cross, sending the greenback down more than half a per cent to a one-month low against the European common currency. The dollar was also down against the Swiss franc and sterling on the session as investors have grown cautious on recent optimism the US economy will recover solidly in the first half of 2002. In the past month, the dollar has surged nearly 8 per cent against the yen while the euro had gained 6 per cent.

The dollar climbed as high 126.40 yen in midday New York trade, the highest level since April 3. A rise above 126.82 yen would send the dollar to a three-year high against the Japanese currency. The euro also surged to an eight-month highs against the yen at 113.50 yen, the highest since April 9, and is approaching a two-year high against the Japanese currency before 113.70.