Uncertain business conditions prevail in the currency market due to panic. However, State Bank’s strict monitoring did not allow the rupee/dollar parity to cross Rs66 barrier this week. Panic and hectic dollar buying continued in the local currency market throughout the week. Most analysts are of the view that rising oil prices in the international market has fuelled the import payment bill particularly that of oil. This has led to sharp deterioration in trade and payment deficit and this situation has exerted downward pressure on the rupee in the local market.

On the opening day of the week, market players observed bearish sentiment in the inter bank market as the rupee weakness versus the dollar persisted due to short supply of dollars following international market closure amid mounting dollar demand from importers. The rupee shed 24 paisa on the buying counter buying and another 25 paisa on the selling counter, changing hands at Rs64.42 and Rs64.45 on April 28, after having closed at Rs64.18 and Rs64.20 last week.

The rupee continued its slide against the dollar on the second trading day of the week further falling by 10 paisa for buying and another nine paisa for selling to trade at Rs64.52 and Rs64.54 for selling due to persistent demand by the importers on April 29. Forward buying ahead of labour day holiday on May 1 pushed the rupee down further on April 30. The rupee shed seven paisa on the buying counter and eight paisa on selling counter on speculative buying by the importers and traded at Rs64.59 and Rs64.62 against the dollar.

On May 2, persisting demand for dollars by the importers pushed the rupee down further after all the markets reopened after one-day closure on account of labour day holiday. The rupee suffered fresh losses of 32 paisa against dollar which traded at Rs64.90 and Rs64.95 as some small investors were also visible in the US currency buying anticipating that dollar may continue its recovery in the world market. This week, the rupee in the inter bank market lost 72 paisa against the dollar.

In the open market, the rupee managed to display strength over the dollar on April 28 as it rose by ten paisa and traded at Rs64.75 and Rs64.85 as against previous weekend’s Rs64.85 and Rs64.95. However, the rupee failed to hold its overnight firmness versus the dollar on the second trading day when it sharply shed 25 paisa and traded at 65.00 and 65.20 on April 29. The rupee continued to fall against the dollar on April 30, losing 90 paisa to trade Rs65.80 and Rs65.90 amid hectic buying of greenback.

Trading in the open market remained suspended on May 1, being Labour Day. Trading in currency, however, resumed on May 2, when the rupee posted some fresh gains and recovered 15 paisa against the dollar despite hectic buying. The dollar closed the day at Rs65.65 and Rs65.75. During the week in review, the rupee in the open market lost 80 paisa against the US currency on cumulative basis.

Versus the European common currency, the rupee posted a smart recovery on the first trading day of the week, gaining 45 paisa on the buying counter and 50 paisa more on selling counter to trade at Rs102.05 and Rs102.15 on April 28, against previous weekend’s level of Rs102.50 and Rs102.65. But this overnight firmness proved short lived as it posted sharp losses of 105 paisa on the second trading day, changing hands at Rs103.10 and Rs103.20 against the euro.

However, the rupee staged a turnaround versus the euro on the third trading day posting fresh gains of 45 paisa to trade at Rs102.65 and 102.75. The market was closed on May 1, for Labour Day holiday. When trading resumed on May 2, the rupee was seen gaining sharply versus euro. It recovered 105 paisa in single day trading to close at Rs101.60 and Rs101.70 against the euro. This week, the rupee managed to show strength over the European single common currency gaining 90 paisa, amid wide fluctuations.

On the international front, the dollar fell against a basket of currencies on the opening day of the week in review, breaking a three-day rally, as buyers retreated to the sidelines. Growing speculation that the Fed might stop cutting interest rates and a rise in US stocks on take-over deals earlier lifted the dollar to a two-month high of 104.82 yen on April 28. The dollar later retreated to around 104.16 yen, down 0.2 per cent on the day, as stocks lost their earlier gains.

In late New York trade, the euro climbed 0.1 per cent against the dollar to $1.5638, snapping a three-day decline. But it was still about 3 cents below last week’s record high of $1.6018. Sterling was up 0.2 per cent on the day at $1.9890. Sentiment toward the dollar improved last week amid stronger-than-expected US corporate earnings and a growing view that the worst of the credit crisis has passed. But some analysts are not convinced that the dollar’s rally may be sustained given the continued fragility of the financial system and the still-considerable stress in credit markets.

On April 29, the dollar rose to an almost one-month high versus the euro buoyed by growing views that the Federal Reserve is ready to signal a pause in its interest rate cutting-campaign and by weak European economic data. The dollar was shackled in tight ranges ahead of a Federal Reserve meeting shortly and a welter of major economic data which could well decide the medium-term outlook for US interest rates. The US currency was headed for its largest monthly gain in almost a year as the policy-setting Federal Open Market Committee started a regular two-day meeting against the backdrop of swelling inflation pressures.

In late New York trade, euro was quoted at $1.5565, down 0.6 percent on the day, while yen stuck near 104.20 to the dollar with turnover very light as the Tokyo market was shut for a holiday. But expectations the Fed’s monetary easing cycle was almost done helped push the US stock market lower, causing the dollar to fall against the yen. The dollar traded down 0.1 percent at 103.93 yen. Data showed US consumer confidence plunged to a five-year low in April. The pound was hurt by a warning from policy-maker David Blanchflower that Britain faced a real risk of recession unless the Bank of England took “aggressive” action. Sterling fell roughly a full per cent to hit a session low of $1.9713.

On April 30, the dollar fell against the euro after the Federal Reserve cut interest rates as expected, but did not convincingly signal a pause in its easing campaign aimed at propping up an ailing economy. The euro surged to a session peak of $1.5642 against the dollar, after initially falling soon after the FOMC decision. It was trading up 0.3 percent at $1.5620. The dollar gave up gains versus the yen. It was flat at 104.00 yen after earlier hitting a two-month high at 104.87. Sterling was up 0.33 per cent at $1.9761,

On May 1, the dollar rose to a five-week high against the euro as traders took profits on the European currency amid optimism that the Federal Reserve’s cycle of cutting interest rates might be done. That view was bolstered by slightly stronger-than-expected US manufacturing and consumer spending data, which sent the dollar surging to a seven-week high versus a basket of major currencies.

The euro dropped to a five-week low of $1.5431 against the dollar. It last traded down 1.0 percent at $1.5456. Traders said the market earlier ran stop-losses in euro/dollar below $1.5490, accelerating the currency’s decline.

The firmer US stock market lifted the dollar against the yen and the Swiss franc. The dollar climbed 0.4 per cent to 104.36 yen. Against the Swiss franc, it jumped to a two-month high of 1.0508. It was last trading up 1.3 per cent at 1.0490 Swiss francs. Sterling fell against the dollar giving way to a broad rally in the greenback after data showed rising US inflation pressures that could slow the pace of any further monetary easing there. It was down 0.7 percent on the day at $1.9717, having earlier hit an intraday high at $1.9909.

At the close of the week on May 2,the dollar was steady near a two-month high against a basket of major currencies after US data reinforced expectations the Federal Reserve will keep interest rates on hold for a while. In Tokyo, it climbed 0.2 per cent from late US trade to 104.62 yen pushing back near a two-month high of 104.89 yen hit earlier in the week on trading platform EBS.