Rupee firm against dollar

Published August 8, 2005

THE local currency market witnessed another steadier week with the rupee- dollar parity remaining stable throughout the week in review. The market had sufficient stock of dollars to match the demand. However, there was lack of dollar-buying interest with the parity moving both ways in a narrow range.

The rupee maintained a firm posture versus the dollar in the inter-bank market on the opening day of the week, retaining its weekend’s level versus the US currency. There was no big demand for dollar in the absence of corporate demand. The parity traded almost unchanged at last week’s levels of Rs59.62 and Rs59.64 in modest business on August 1.

On August 2, the rupee-dollar fluctuated slightly, trading at Rs59.63 and Rs59.65. The rupee did not show major change against the dollar on August 3, when it changed hands at Rs59.63 and Rs59.64. On August 4, the rupee shed two paisa versus the dollar to trade at Rs59.65 and Rs59.66.

Increased dollar’s inflows on August 5, helped the rupee-dollar parity maintain its overnight levels. The rupee was unchanged versus the dollar at Rs59.65 and Rs59.66. Over the previous week close it, however, shed three paisa against the dollar this week.

In the open market, after last week’s range bound trading, the rupee gained five paisa versus the dollar for buying at Rs60.40, while it remained unchanged for selling at Rs60.50 on August 1. The rupee on August 2, retained its firmness versus the dollar and traded at its overnight levels of Rs60.40 and Rs60.50.

The rupee continued to hold its steadier trend due to dollar selling by exporters and strong remittances inflows on August 3. It managed to hold its month long levels versus the dollar unchanged at Rs60.40 and Rs60.50. No change was witnessed in the rupee-dollar parity on August 4.

On August 5, the rupee shed five paisa against the dollar for buying at Rs60.45 while it did not show any change on the selling counter at 60.50, closing the week unchanged against the previous week.

Against the European single common currency, the rupee opened the week unchanged at its last weekend’s levels of Rs73.0 and Rs73.20 on August 1. The rupee, however, gained 10 paisa in relation to trade at Rs72.90 and Rs73.10 on August 2.

On August 3, the rupee lost 50 paisa against the euro as the local currency continued its weakness on in the open market changing hands at Rs73.40 and Rs73.60. The rupee continued its overnight weakness versus the euro on the following day. It lost 10 paisa more on August 4, and traded at Rs73.50 and Rs73.70.

Due to rising trend in the international markets against the dollar and other major currencies, the euro managed to cross the Rs74 mark in terms of the rupee on August 5. The local currency shed 30 paisa versus the euro for buying and selling at Rs73.80 and Rs74.00. This week the rupee lost 60 paisa against the European single common currency.

In the international markets, the dollar moved down versus the major currencies on the opening day of the week in review. It pared losses on August 1, after stronger-than-expected data on the US manufacturing and options-related trading partially offset central bank demand for euros in quiet trading.

A wave of options-related euro selling after a barrier was taken out at $1.2250 prompted a mini-revival for the dollar, although it was still weaker across the board against major currencies. In late trade, the euro was up 0.5 per cent at $1.2185. It had traded as high as $1.2252, according to electronic trading platform EBS.

The currency has been locked in a broad range between a 14-month low near $1.1870 hit in early July and a peak last month close to $1.2260. Illiquid markets, holiday-dominated trading and a reluctance to take on big positions are driving currencies.

The dollar was down 0.8 per cent at 1.2784 Swiss francs and off 0.3 per cent against the yen at 112.23. Sterling was up 0.7 per cent at $1.7684. Currencies reacted little to the death of Saudi Arabia’s King Fahd.

On August 2, the dollar pared some losses after other data showed upward revisions to the US durable goods orders in June, but overall the greenback was down across the board. In late trading, the euro was up 0.2 per cent at $1.2195 after pushing to a high of $1.2254 immediately after the data, right at the top of its recent ranges.

The dollar was down 0.7 per cent at 111.40 yen, though off the session low of 111.11 yen. The dollar slipped 0.2 per cent to 1.2765 Swiss francs. Sterling was up 0.2 per cent at $1.7705. It was the fifth day of gains for sterling against the dollar.

On August 3, the dollar fell for a third straight day in broad-based selling ignited by the euro’s breakout from a four-week trading range to reach its highest level in two months. The dollar also fell to a six-week low against the Swiss franc and a three-week trough against sterling as traders focused on technical levels.

Market talk that oil-rich countries, reaping record crude prices, have been diversifying their dollar-heavy reserves into euros, has also driven the greenback lower in recent days. The euro had tried and failed to break through $1.2250-60 earlier this week, but finally managed it on August 3, rising 1.1 per cent to $1.2332.

The dollar was down 1.2 per cent at $1.2611 against the euro. The dollar was down 0.3 per cent against the Japanese yen at 111.06 as the market weighed the fate of Japan Prime Minister Junichiro Koizumi’s controversial postal reform bills. Swiss francs and sterling was up 0.3 per cent at $1.7769.

On August 4, the dollar weakened against most major currencies in a seesaw session, as dealers adjusted positions ahead of July US employment report. The euro powered to a fresh 2-month intra-session high of $1.2402, while the dollar tumbled to a two-month low against a basket of currencies.

More talk of central banks selling dollars, stop-loss sell orders and relatively thin markets conspired to push the dollar lower against most currencies except the yen. After slipping to around $1.2310 earlier in the New York session, the euro rallied to trade above $1.2400 for the first time since May 31.

In New York trading, the euro had eased to $1.2380, still up 0.3 per cent from the prior session, while sterling was up at $1.7802. The dollar was down 0.2 per cent against the Swiss franc at 1.2578 francs. The dollar managed to stay in positive territory against the Japanese currency, up 0.3 per cent at 111.32 yen.

At the close of the week on August 5, the yen slumped hitting a three-month low against the euro as uncertainty grew about the fate of Japan’s postal reform bills and their sponsor - Prime Minister Junichiro Koizumi.

The dollar meanwhile ticked up from previous day’s two-month low against the euro but lacked energy to extend gains ahead of a US jobs report later in the day. The euro bought around $1.2370, down slightly on the day but still in sight of the two-month high of $1.2403 hit on August 4. The dollar bought around 111.70 yen, up 0.4 per cent from 111.23 yen in late US trade.

Sterling fell from a recent one-month high against the dollar with the US currency finding respite from strong employment data and the pound getting little support from the UK production figures. It traded at $1.7737 against the dollar, down 0.4 per cent on the day, having dipped to $1.7716 after the US payrolls figures. It had hit a one-month high on Wednesday at $1.7831.

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