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Mixed sentiments were observed in the local currency market this week, with the rupee trading in a narrow range in the interbank market.
It, however, crossed Rs61 barrier against the American currency in the open market and also extended its weaknesses versus the European single common currency. Over the past 12 months, the rupee this week was ten paisa lower against the dollar in the inter bank market, but 65 paisa lower in the open market and Rs5.76 lower against the euro.
This week, trading in inter bank market remained suspended on July 2, being Bank Holiday. However trading activities resumed on July 3, when market players observed weakening of the rupee versus the dollar. The rupee shed three paisa on buying counter and two paisa on selling counter, as it was seen changing hands at Rs60.39 and Rs60.40. Last week the market had closed at Rs60.36 and Rs60.38.
On July 4, the rupee, however, made a modest recovery as it inched up one paisa versus the dollar, which traded at Rs60.38 and Rs60.39, amid dull trading activities. The rupee was unable to hold its overnight firmness over the dollar and slid two paisa on buying and three paisa on selling on July 5 to trade at Rs60.40 Rs60.42, on slightly higher demand for dollar.
Improved supply of dollars helped the rupee to recover its gains against the US currency on July 6, as the rupee gained four paisa against the dollar, which was quoted at Rs60.36 and Rs60.38 at close. On Cumulative basis, the rupee in the inter bank market was unchanged against the dollar amid fluctuations at the close of this week.
In the open market, bullish trading activity was observed on the opening day of the week in review. The first session of the new fiscal year commenced on a bullish note, as it managed to gain five paisa against dollar in the open market on July 2, changing hands at Rs60.85 and Rs60.95. The demand for dollar was low amid slow trading. The dollar was at Rs60.90 and Rs61.00 last week.
On July 3, the rupee, however, dropped five paisa for buying and four paisa for selling to trade at Rs60.90 and Rs60.99 versus dollar. The downtrend in the rupee/dollar parity persisted on July 4. The rupee further shed rupee six paisa in relation to dollar and traded at Rs60.95 and Rs61.05, on increased dollar demand in the interbank.
On July 5, the rupee failed to resist mounting pressure of dollar and lost 10 paisa, trading at Rs61.05 and Rs61.15 due to strong demand by the importers. On July 6, the rupee shed three paisa against the dollar for buying while it did not show any change on selling counter, changing hands at Rs61.08 and Rs61.15. This week, the rupee, however, lost 18 paisa against the dollar in the open market.
Versus the European common currency, the rupee picked up 18 paisa and traded at Rs81.75 and Rs81.85 on the week's opening day. The rupee had closed last week at Rs81.93 and Rs82.03. The rupee continued its down trend versus euro and lost 58 paisa on the second day of trading, when it was quoted at Rs82.33 and Rs82.43. On the third day of trading, the rupee further lost nine paisa to change hands at Rs82.42 and Rs82.52 against the euro.
The rupee extended its week long weakness on the fourth trading day, shedding another four paisa to trade at Rs82.46 and Rs82.56 against the euro. The rupee, however, managed to gain 14 paisa against the euro on the fifth trading day, trading at Rs82.32 and Rs82.42. During the week in review, the rupee lost 39 paisa on cumulative basis versus the European single common currency.
In the international financial market, the dollar tumbled to a 26-year low against sterling and declined across the board on July2, on continuing expectations that US interest rates will remain steady while borrowing costs rise overseas. The dollar fell earlier to within half a cent of a record low against the euro, extending Friday's heavy losses in the wake of soft reports on US consumer price inflation and personal income and spending.
EURO: The euro was 0.6 percent higher at $1.3622 in late afternoon New York trade and in sight of a record high just above $1.3680 hit in April. The dollar was down 0.6 percent at 122.32 yen. The dollar fell 0.6 per cent against a basket of major currencies, close to a two-and-a-half-year low touched on March 2005.
Sterling homed in on April's 26-year highs versus the broadly weakening dollar, moving above $2.01 with investors bolstered by prospects that the Bank of England will raise interest rates this week. It rose to a 2-1/2 month high of $2.0128, moving further toward April's 26-year peaks hit at $2.0133. It later trimmed those gains to stand at $2.0108
On July 3, the dollar rebounded but remained near a record low against the euro as investors eyed central bank meetings this week in Europe which could keep overseas yields climbing. The dollar rose against a basket of six major currencies, steadying after two sessions of sharp falls. Volume dwindled in early afternoon in New York ahead of the Independence Day holiday on July 4.
In New York, the euro was down 0.15 percent at $1.3614, still in sight of a record high just above $1.3680 hit in April. The dollar was barely changed against the Japanese yen at 122.38 yen. The dollar fared better against the Swiss franc, rising 0.4 percent to 1.2155 francs after a tame reading of Swiss consumer price inflation earlier in the session.
Sterling hit its highest level in a quarter of a century versus the dollar and the euro hit a record peak against the low-yielding yen as investors shopped for currencies with attractive yields. It stood at $2.0150, broadly steady on the day, after hitting a 26-year peak of $2.0197.
Dollar: On July 4, the dollar held near a 26-year low against the pound and a two-month trough versus the euro, with trade quiet around the US Independence Day holiday as investors awaited key central bank verdicts later this week.
The dollar was almost flat from late US trade at 122.40 yen holding in the 122-123 yen zone after pulling back from a 4-1/2-year high of 124.14 yen hit in late June.
The euro drifted sideways at $1.3610 off a two-month peak of $1.3639 and not far from the record high $1.3683 hit in April. The single European currency was little changed at 166.60 yen after touching a record 167.20 yen the previous day. The dollar rose 0.2 per cent to 122.62 yen, holding in the 122-123 yen zone after pulling back from a 4-1/2-year high of 124.16 yen hit in June. Sterling was steady at $2.0163, having hit a 26-year peak above $2.02 earlier.
On July 5, the dollar rose versus the yen and euro as an unexpected gain in US services sector activity eased concerns the central bank may have to cut interest rates later this year. The greenback erased early losses against the euro after the Institute for Supply Management's non-manufacturing index rose in June to its highest in a year, beating forecasts of a modest decline.
In late trading in New York, the euro traded down 0.10 percent at $1.3597, well below a high of $1.3660 hit earlier in the session. The dollar was up 0.2 per cent at 122.88 yen. The Japanese yen, the world's lowest-yielding major currency, also hit another record low of 167.29 per euro. The dollar fell against sterling after the Bank of England raised interest rates, as expected, to 5.75 per cent and said inflation risks remained to the upside. The US currency hit a 26-year low versus the pound on July 5.
The day's biggest winner was the New Zealand dollar, which climbed 0.15 percent to US $0.7822 after hitting US $0.7881, the highest since the currency was floated in 1985. The pound hit a session high of $2.0202 - closing in on this week's 26-year peak hit at $2.0207, before retreating to $2.0132, as the dollar got a boost from strong US data.
At the close of the week on July 6, the dollar held gains staying off a two-month low against the euro and a 26-year trough versus sterling after strong US services data soothed concerns the Federal Reserve may cut interest rates later this year. The dollar stood at 123.15 yen up 0.15 per cent from the previous day's late New York trade and not far from its 4-1/2-year high of 124.14 yen hit in late June.
The euro was little changed from late US trade at $1.3595 off a two-month high of $1.3660 hit the previous day and an all-time peak of $1.3683 reached in late April. The dollar was under pressure earlier this week on worries about weakness in the housing market and subprime mortgage woes, as well as security concerns ahead of Independence Day holiday.
Sterling steadied below this week's 26-year highs versus the dollar but stayed comfortably above the $2 mark, supported by Bank of England rate hike and expectations for further tightening. The pound's bullish yield outlook helped it withstand broad strength in the dollar after a stronger-than-expected US non-farm payrolls report eased concerns that the US central bank may cut interest rates this year. It was steady on the day at $2.0101, off a 26-year peak of $2.0207 hit earlier in the week.
