THE rupee/dollar parity moved both ways this week. In the local currency market, the demand pressure on the rupee persisted but rising trend in overseas remittances and increased inflows of export proceeds did not allow the rupee to fall sharply.

On the opening day of the week, stable trend prevailed in the inter-bank market as the rupee shed two paisa for buying and one paisa for selling.

The American dollar was seen changing hands at Rs59.95 and Rs59.96, against the last week’s Rs59.93 and Rs59.95 on March 6. On March 7, the rupee shed one paisa versus the dollar for buying and another two paisa for selling to trade at Rs59.96 and Rs59.98 on rising demand by the corporate sector.

On March 8, inflows of dollar helped the rupee to limit its losses in the inter-bank market. It staged a marginal recovery against the dollar, which traded at Rs59.95 and Rs59.97, amid rising demand for the US currency. However, sufficient inflows of remittances from abroad restricted any sharp fall in rupee value. On March 9, the rupee managed to hold its overnight level at Rs59.96 and Rs59.97, despite big payments. Rising trend in the remittances and selling of export proceeds released slight pressure over the rupee.

On March 10, the rupee drifted lower versus the dollar in the inter-bank market, shedding one paisa for buying and two paisa for selling to trade at Rs59.97 and Rs59.99 in presence of strong demand for the US currency. As compared to last week close, the rupee this week in the inter bank market lost four paisa versus the dollar.

In the open market, mixed trend was seen on March 6. The rupee shed two paisa versus the dollar for buying, but it gained the same amount for selling to trade at Rs60.02 and Rs60.08 against previous week close of 60.00 and 60.10. On March 7, the rupee moved both ways. It gained two paisa in relation to the dollar for buying and shed two paisa for selling to trade at Rs60.00 and 60.10.

On March 8, the rupee/dollar parity remained almost unchanged for selling but dipped two paisa for buying, changing hand at Rs60.02 and Rs60.10. Slight improvement in the supply of dollar helped the rupee to retain its value for the second day in a row on March 9. It remained traded at Rs60.02 and Rs60.10. On March 9, the rupee maintained its overnight levels versus the dollar for the third consecutive day and traded at Rs60.02 and Rs60.10. Over the previous week close, the rupee in the open market lost only two paisa on buying.

Versus the European single common currency, the rupee continued its weakness, shedding five paisa to trade at Rs72.05 and Rs72.15 on the first day of trading against the previous weekend’s Rs72.00 and Rs72.10. The rupee, however, gained versus the euro on the second day of trading. It recovered 55 paisa changing hands at Rs71.50 and Rs71.60. It further gained 25 paisa on the third day of trading, as the euro was trading Rs71.25 and Rs71.35

The rupee failed to continue its steadier trend versus the euro and shed 15 paisa on the fourth day of trading to trade at Rs71.40 and at Rs71.50. On the fifth day, the rupee recovered from its overnight weakness versus the euro and gained five paisa, changing hands at Rs71.35 and Rs71.45. During the entire week, the rupee gained 65 paisa versus the euro, amid fluctuations.

In the international financial markets, the dollar strengthened broadly on March 6. Its bounce back from a bruising week last week helped by raising US bond yields and position adjustment by short-term market participants, particularly in the yen.

The yen, which hit a one-month high against the dollar last week, sold off across the board as investors gravitated toward the view that the Bank of Japan would not raise rates anytime soon, even if it begins tightening monetary policy as early as its policy meeting this week.

The US economic data showed less-than-expected decline in February factory orders and upward revisions to January’s durable goods orders also lent some support to the dollar. The euro was at $1.2015, down 0.2 per cent from last week close. Earlier in the day, the euro had briefly extended last week’s gains to hit a new one-month high of $1.2093, just shy of the $1.21 level said by some traders to be a major options barrier.

The dollar recovered from a one-month low against the Swiss franc to trade flat on the day at 1.2986 francs, while sterling was off 0.3 per cent on the day at $1.7495.

The dollar was up almost 1 per cent against the yen at 117.60 yen and the euro was up at 141.26 yen. Many are looking for the BoJ to announce as early as this week that it will bring its quantitative easing policy - flooding the banking system with excess cash - to a close as the economy recovers and consumer prices appear to be on the rise.

Meanwhile, the New Zealand dollar fell to new 18-month lows around $0.6555. Sterling stepped back from an earlier one-month high against the dollar as the greenback rose across the board, but sentiment was underpinned by expectations for inflows related to corporate take-over news. It was down 0.1 per cent at $1.7521 after rising to the high of $1.7624.

On March 7, the dollar rallied broadly, driven by a Federal Reserve official’s comments on the opening day that more US interest rate increases may be needed if economic growth stays strong. The dollar got an extra boost early in the US session from a sharp jump against the Canadian dollar after the Bank of Canada raised rates as expected but surprised investors with a less hawkish stance on future monetary policy.

In the New York session, the euro was at $1.1886, down more than one per cent from the previous week and skimming the lows for the day. This was the euro’s biggest one-day decline in percentage terms this year, making its one-month high of $1.2093 on March 6, following the European Central Bank’s quarter-point rate hike last week seem a long way off.

The dollar’s earlier rally was given extra impetus by its spike up against the Canadian dollar after the Bank of Canada raised rates by an expected 25 basis points to 3.75 per cent but softened its outlook. Traders initially interpreted this as a signal the BoC’s current tightening cycle may soon finish. But some analysts said this was not necessarily the case.

The greenback was up 0.9 per cent on the day at C$1.1499. The euro was down 0.8 per cent against the yen at 140.13 yen after hitting an intraday high of 141.34 yen, and the dollar was up 0.3 per cent at 117.91 yen. The dollar rose more than one per cent against the Swiss franc to 1.3132 francs, and sterling lost 0.8 per cent to trade at $1.7353.

On March 8, the dollar slipped against major currencies, but held within tight ranges, consolidating the previous session’s gains as traders awaited several potentially market-moving events later in the week. Most of the foreign exchange market action was concentrated in emerging market currencies, many of which tumbled as concerns over rising global interest rates sparked moves out of higher-yielding, riskier assets.

The dollar rallied strongly earlier this week amid growing expectations US interest rates will continue to rise in the coming months. Ahead of events later in the week, dealers took advantage of a session devoid of US economic data to trim positions and lock in some profits. In late trading, the euro was up 0.3 per cent on the day at $1.1922, while sterling was up a touch at $1.7376. The dollar was off 0.4 per cent against the Swiss franc at 1.3082 francs and down a touch against the yen at 117.83 yen.

Sterling held steady against the dollar and lost ground against the euro after a fall in shop price data tempered news that British house prices notched up their biggest gain in six months. It was flat at $1.7353 after hitting session highs of $1.7418 in morning trade when the property market data was released. It hit a two-week low of $1.7328 on March 7.

Markets see the BoJ raising rates to 0.25 per cent or 0.5 per cent by year-end from virtually zero currently, but do not expect much more than that, which would keep the yen among the lowest-yielding currencies in the world. The BoJ has held interest rates below 0.5 per cent since 1995. The New Zealand dollar halted its steep decline of late after the Reserve Bank of New Zealand kept rates on hold at 7.25 per cent and indicated that there would be no rate cut this year.

On March 9, the dollar strengthened, gradually rebounding against the yen after the Bank of Japan’s decision to end a five-year policy of flooding the banking system with cash and drawing broad support ahead of an expected strong US employment report. Broadly speaking, the dollar managed to withstand the BOJ policy shift and dollar-bearish trade data because the US employment report is expected to show solid job creation in February, thus bolstering expectations of further Federal Reserve interest rate increases.