The rupee/dollar parity came under slight pressure and assumed downtrend in the inter-bank market this week. The demand for dollar increased on account of heavy payment requirements after trading resumed following the long weekend on account of Eid-ul-Fitr.

Despite strong dollar-demand, rupee lost modest ground and shed only 2 paisas on the week’s opening day and traded against the dollar at Rs57.26 and Rs57.27 on December 1, compared to previous week close of Rs57.24 and Rs57.25. Pressure on the rupee continued on December 2 and it lost another 4 paisas, with the dollar changing hands at Rs57.30 and Rs57.32.

Heavy payment on December 3, exerted further pressure on the rupee in inter-bank market, which lost 2 paisas more to trade at Rs57.33 and Rs57.34 against the dollar. The rupee in the inter-bank market extended further losses on December 4. It shed 4 paisas to touch the week’s lowest level at Rs57.37 and Rs57.38 against the dollar. On December] 5, however, rupee managed to recover 2 paisas against the dollar which changed hands at Rs57.35 and Rs57.36 after a modest fall in dollar demand. During the week, as a whole, the rupee suffered a fall of 11 paisas against the dollar.

In kerb, dealings, the parity moved both ways. The rupee commenced the week on a dismal note and shed 5 paisas to trade at Rs57.15 and Rs57.25 versus the dollar on December 1. However, on December 2 it managed to revert to its previous weekend’s level after gaining 5 paisas to change hands at Rs57.10 and Rs57.20. due to balanced demand and supply on December 3, the parity did not show any a change and remained stable at its overnight level. On December 5, the rupee failed to maintain its overnight firmness on slight increase in dollar demand and lost 5 paisas at Rs57.15 and Rs57.25. Continued demand pressure on December 5, pushed the rupee further shedding 5 paisas against the dollar which changed hands at Rs57.20 and Rs57.30 at close. During the week, the rupee showed a depreciation of 10 paisas against the dollar in the kerb.

Against the euro, the rupee remained fluctuated. However, it remained under strong demand pressure throughout the week. On December 1, the rupee suffered a sharp fall of 115 paisas against the single European currency and traded at Rs68.15 and Rs68.45. It recovered 20 paisas on December 2, when euro was seen changing hands at Rs67.95 and Rs68.25, but then it lost 70 paissa on the following day and traded at Rs68.65 and Rs68.95 on December 3. On December 4, euro traded at Rs68.60 and Rs68.90, reflecting 5 paisas gain in rupee value but than it lost 10 paisas on December 5, closing the week at Rs68.70 and Rs68.90. The rupee lost 170 paisas against the euro in the week.

Against other major currencies at the inter-bank counter, the rupee extended losses versus the British pound, the Canadian, Australian, Hong Kong, New Zealand and Singapore dollars, the Swiss francs, the Swedish krona, the Danish and Norwegian krones, the Japanese yen, the Chinese yuan, the Malaysian ringgit, the South Korean won, the Thai bhat, the Kuwaiti dinar, the Saudi and Qatari riyals, and the UAE dirham.

In the international financial market the dollar, failing to capitalize on the fastest pace of growth in the US manufacturing in 20 years, made only minor gains versus its main rivals on the week’s opening day on December 1, as investors shunned the US assets. The euro palled back from its record high $1.2041 in the wake of the factory activity data, but overall lost little ground, while the greenback slipped against the yen. Reports that Washington may repeal steel tariffs to head off a trade war proved only a short-term positive for the dollar.

The euro traded at $1.1968, off 0.19 per cent on the day and more than half a cent below the record high. The dollar traded at 109.36 yen, a loss of 0.22 per cent. But the dollar advanced against the Swiss franc, rising to 1.2977 francs, a gain of 0.51 per cent on the day. The pound slipped slightly to $1.7184, while the Australian dollar climbed to a six-year high of US $0.7284 on speculation that the Reserve Bank of Australia will raise the current interest rate of 5 per cent.

In London, the pound maintained gains near its five-year high set against a generally weak dollar, with upbeat UK data underpinning the momentum. The greenback fell to a record low against the euro and also lost ground against almost all of its peers, on lingering concerns about the US economic imbalances. The pound drew support from data showing Britain’s manufacturing sector expanded at its fastest pace in nearly four years in November and strong mortgage lending figures for October

On December 2, the dollar hit a record low versus the euro in a broad sell-off as investors ignored a US economic upswing and instead went along with the dominant dollar downtrend. The euro surged to a fresh record highs for the third straight day, touching $1.2091 and measured a 1 per cent gain on the day. In the last month, the US financial markets have seen an outflow of foreign capital that is highly correlated to the decline in the dollar,

Sterling hit a five-year high against the dollar for the fifth straight session, reaching $1.7309 a gain of roughly 0.75 per cent on the day. If sterling hits the $1.7350 area, it will be its strongest point since busting out of the ERM 10 years ago. The dollar fell to a near two-week low against the yen of 108.54, off 0.74 per cent, while hitting a six month low of 1.2850 Swiss francs, off nearly 1 per cent. On December 3, the dollar slumped to a record low against the euro for a fourth straight day as investors focus on the dominant sell-off trend and not on the strong US data that herald an economy regaining its stride. The dollar sell-off has for weeks overwhelmed a string of strong economic data, including government report showing US workers operated more efficiently in the third quarter than at any time in the last 20 years.

The dollar, after reaching significant lows against its major rivals in the last week, hardly stirred despite the strong productivity data. Likewise, reports showing disappointing growth in the vast US services sector last month and a dip in US mortgage applications last week were no help, but not seen as major hindrances either. Additionally, the inability of the US financial markets to attract enough capital to offset the US current account deficit given benchmark interest rates are at a 45-year low of 1 per cent is another reason for looking for investment growth elsewhere.

Signs that Germany was not worried by the euro’s persistent climb gave added encouragement to euro bulls who bid the euro up to a record high $1.2128 according to Reuter’s data. It then retreated to $1.2103, still a small gain of 0.22 per cent on the day. The euro is now trading about 3-1/2 cents higher than its launch level where the currency first traded around $1.1747 in January 1999. It reached a low near $0.8225 in October 2000.

Fears of intervention by the Bank of Japan to hold the yen down against the dollar, kept the greenback from sliding too much against the Japanese currency. The dollar traded near its two-week low around 108.15 yen off roughly a third of a per cent on the day. The Australian dollar leapt to a new six-year high above US $0.7370 after the Reserve bank of Australia raised rates for a second straight month to 5.25 per cent. That helped bring its gains against the greenback to more than 31 per cent in 2003.

Sterling hit a fresh five-year high for the sixth straight session, touching $1.7317. Sterling held near its five-year peak set earlier versus a broadly weaker dollar, with sentiment buoyed by an upbeat services sector survey ahead of a Bank of England interest rate decision this week.

On December 4, the dollar rebounded from a fifth straight record low versus the euro as investors grew transfixed on US jobs report and shrugged off the scrapping of United States steel tariffs.