DIVERGENT trends were witnessed in the local currency market last week. Confused over the future oil price trends most of the currency dealers adopted a wait-and-see policy and kept to the sidelines.

In January 2016, the rupee depreciated against the dollar by 0.1pc on the interbank market and by 0.5pc in the open market. Some analysts fear that the local currency could depreciate to fresh lows against the greenback in coming months. However, no significant changes were witnessed in the rupee/dollar parity last week on the interbank market.

The rupee traded almost unchanged against the dollar in the interbank dealings amid lacklustre demand throughout the last week after commencing the first trading session at Rs104.94 and Rs104.95, unchanged against the dollar from the previous weekend level.

The demand and supply of dollars remained in balance

After trading flat at Rs104.94 and Rs104.95 for the four successive sessions, the rupee in the last trading session staged a recovery posting four paisas gain on the buying and three paisas on the selling counters before closing the week at Rs104.90 and Rs104.92. Both the demand and supply of dollar remained in balance.

Analysts are of the opinion that fall in international oil prices would keep the greenback demand on lower side. On week-over-week basis, the dollar depreciated against the rupee by 0.04pc on the interbank market last week.

In the open market, minor changes were witnessed during the week with the rupee trading against the dollar between the high of Rs106.20/50 and the low of Rs106.30/60. It commenced the week in negative mode as it posted 10 paisas loss in the first trading session at Rs106.20 and Rs106.50. During the session, the dollar crossed Rs107 at one stage, but the rupee staged a quick recovery and settled at Rs106.20 and Rs106.50, down 10 paisas over the last closing of Rs106.10 and at Rs106.40.

On week-on-week basis the dollar gained 30 paisas on the buying and 25 paisas on the selling counters in the open market last week.

Against euro, the rupee showed hefty variations last week. Snapping last two sessions’ winning streak of the previous week, the rupee commenced last week in minus against euro. It shed 25 paisas in the first trading session and was seen changing hands against the euro at Rs115.50 and Rs116.50 against the prior weekend’s Rs115.25 and Rs116.25 despite the low-yielding euro halted the rise in international market following recovery in stock markets and oil prices that provided some relief to battered commodity-linked and oil-related currencies.

During the week in review, the rupee lost Rs1.75 in three sessions while recovering 70 paisas against euro in two sessions. On week over week basis, however, the rupee was able to minimise cumulative losses against euro in the week to Rs1.05. This brings euro appreciation against the rupee in January 2016 to 1.1pc, amid fluctuation.

Published in Dawn, Business & Finance weekly, February 1st, 2016