Rising import bill and lack of funds inflow continues to exert downward pressure on the rupee. Strong measures are needed on the political and economic front to restore confidence of the investors and business community.

Economic managers and officials at the highest level should immediately address to the problems currently being faced by the country before it is too late. Short term and long term polices should be devised and implemented to put the economy back on track.

Prevailing situation has adversely affected the rupee/dollar parity in the local currency market. The rupee has depreciated against the dollar by nearly 21 per cent over the past 12 months and by almost 18 per cent over the past eight month since February 18 this year. The rupee weakening trend persisted this week.

The week commenced on bearish sentiment with heavy demand for dollar exerting pressure on the rupee/dollar parity in the inter-bank market on September 8. Importers presence in the local currency market to buy dollars to meet their payment needs posted fresh losses of 10 paisa on the buying counter and another 15 paisa on the selling counter. At the close of the day, the dollar was trading at Rs76.45 and Rs76.55 against last week close of Rs76.35 and Rs76.40. On September 9, the rupee resisted any sharp decline against the dollar. It lost five paisa on the buying counter but remained unchanged on the selling counter, changing hands at Rs76.50 and Rs76.55.

The downtrend in the rupee/dollar parity persisted on September 10, when the rupee suffered a further decline of five paisa and traded at Rs76.55 and Rs76.60 against the dollar. Another five paisa fall was recorded in the rupee value on September 11, as rupee continued to slide against the dollar, which was seen changing hand at Rs76.60 and Rs76.65 at the close of the day. On September 12, the rupee managed to reverse its downward trend against the dollar despite rising demand for the US currency. It recovered 10 paisa over its overnight level and traded against the dollar at Rs76.50 and Rs76.55. However, despite increased demand for US currency during the week in review, the rupee in the inter-bank market was able to maintain a stable trend against the dollar amid mild fluctuations.

In the open market, the rupee continued its weakening trend versus the dollar, entering the week in review with 30 paisa decline on the buying counter. However, it managed to remain stable on the selling counter, changing hands at Rs76.10 and Rs76.40 on September 8. The rupee had closed last week of Rs75.80 and Rs76.40. The rupee weakness over the dollar persisted on the following day, as it further slid, losing 10 paisa to trade at Rs 76.20 and Rs 76.50 against the dollar on September 9.

On September 10, the rupee continued to slide against the dollar on the buying and selling counters. It posted fresh decline of 10 paisa for buying and another 20 paisa for selling to trade at Rs76.30 and Rs76.70. The rupee further extended its weakness versus the dollar on September 11, suffering fresh losses of 20 paisa on the buying counter and 10 paisa on the selling counter and traded at Rs76.50 and Rs76.80. Another 20 paisa decline in the rupee value was witnessed on September 12, when the dollar traded at Rs76.70 and Rs77 However, cumulative loss in rupee value against the dollar was 90 paisa in the open market this week.

Versus the European single common currency, the rupee weakness persisted on the first trading day of the week in review. It dropped sharply against euro, shedding Rs1.15 to trade at Rs109.10 and Rs109.30 on September 8, after closing at Rs107.95 and Rs108.15 in the previous week. The rupee extended its falling trend against the euro on the second trading day further losing Rs2.30 and changing hands at Rs106.85 and 107 on September 9.

Downtrend continued for the third consecutive day on September 10, with the rupee posting fresh losses of 55 paisa against the euro on buying counter and another 50 paisa on the selling counter to trade at Rs107.40 and Rs107.50. The rupee, however, managed rebound versus euro for the first time in four days, gaining 105 paisa and trading at Rs106.35 and Rs106.50 on September 11. But the overnight recovery proved short lived as the rupee further shed 55 paisa on the buying counter and 70 paisa on the selling counter on September 12, when euro traded at Rs106.90 and Rs107.05, after the dollar stayed near a one-year high against euro on fears the global economy, especially outside the United States, would slow down. However, the rupee managed to recover 105 paisa versus the European single common currency on cumulative basis this week.

In the international financial market, the US dollar rallied to a one-year peak against a basket of currencies on the opening day of the week, as the government’s take-over of the country’s two biggest mortgage finance agencies boosted confidence in the US financial sector. The bailout of the beleaguered Freddie Mac and Fannie Mae also prompted investors to wade back into risky trades, by buying higher-yielding currencies and selling the yen.

On September 8, the euro was flat on the day at $1.4118, near an 11-month low of $1.4049 hit earlier. Another factor adding support to the dollar was oil retreating below $105 a barrel, while the dollar also fell 0.5 per cent to 107.72. The yen’s resilience also encompassed the Australian dollar and sterling. The dollar also gained 1.1 per cent against the low-yielding Swiss franc to 1.1309 francs. Sterling fell against a broadly stronger dollar by 0.2 per cent to $1.7628.

On September 9, the dollar slumped against the Japanese yen as steep falls in Wall Street stocks led by Lehman Brothers rekindled worries about a shaky US financial sector. In late trading, the dollar dropped to a session low against the yen at 106.84. It last traded at 107.07, down 1.2 per cent on the day. The euro was down 0.2 percent against the dollar at $1.4104, still above a nearly 11-month low touched overnight.

The euro earlier got a bid against the dollar after data showing US pending home sales fell more than expected in July. Sterling rose as high as $1.7668, before pulling back to $1.7601 and was up 0.1 per cent at the close of the day. The UK currency hit its lowest since April 2006 on September 8, at $1.7469.

On September 10, the dollar climbed to a fresh one-year high against major currencies and surged to nearly 12-month highs versus the euro, as falling oil prices and a bounce in US stocks overcame worries about the health of financial firms. Those gains came as the euro tumbled to a nearly 12-month trough of $1.3995 on the view that economic growth in the euro area could slow more sharply than previously anticipated. The dollar saw its largest one month rise in more than a decade in August. The euro last traded at $1.4000, down nearly one per cent on the day.

The dollar also rose against the yen, ignoring the Lehman news. The dollar was last up 0.9 per cent at 107.80 yen. It climbed 0.7 per cent to 1.1340 Swiss francs. Sterling fell against the dollar and the euro as weak results from troubled US bank Lehman Brothers caused investors to pare back their exposure to risk. It was down 0.2 per cent against the dollar at $1.7570, as the dollar rose across the board, recovering from an initial slide after the Lehman figures were announced.

On September 11, the euro tumbled to $1.3882, its lowest since September 2007. It was last trading around $1.3945, down 0.3 per cent, losing 5.3 per cent so far on the month. The dollar dropped 0.6 per cent to 106.93 yen. The yen has been the only currency so far that the dollar has not been able to conquer, with the greenback down 1.5 per cent on the month so far. Sterling hit a 2-1/2 year low versus the dollar after Bank of England pointed to a deeper than forecast decline in the UK economy and rises in unemployment soon. It was at $1.7448 on September 11.

At the close of the week on September 12, the dollar stayed near a one-year high against the euro on fears the global economy, especially outside the United States, would slow down. The yen had slid sharply in late New York trade on reports that Lehman Brothers was in talks about a possible sale, with Bank of America or Barclays named as potential suitors.

Traders said a deteriorating global economic outlook and a jump in market volatility convinced US investors to close their overseas investments and secure cash, giving a boost to the dollar. The euro dropped 0.2 per cent to $1.4007 after rebounding from a one-year low of $1.3882 hit a day earlier. Sterling rallied one per cent higher to $1.7794, recovering from a tumble to $1.7445, the pair’s weakest since April 2006.