Mixed trend was witnessed in the currency market this week. The rupee/dollar parity moved both ways and remained range bound amid slow trading activity. In the interbank market, the rupee came under modest pressure on emerging demand from local and foreign banks amid bearish trend on the opening day of the week.
The rupee lost ground versus the dollar shedding 4 paisa buying and 5 paisa for selling to change hands at Rs57.75 and Rs57.77 on July 14. The rupee remained under buying pressure on July 15, extending further losses of 2 paisa for buying and only restricted by sufficient dollar supply which traded at Rs57.77 and Rs57.78.
The rupee regained its firmness on July 16 and made a modest recovery of one paisa changing hands at Rs57.76 and Rs57.77 against the dollar in quiet trading. Continued dollar inflows helped the rupee extend overnight gains over dollar on July 7, when the dollar traded at Rs57.74 and Rs57.75 after the rupee appreciated by 2 paisa. The rupee extended further gains on July 18, and traded at Rs57.70 and Rs57.72 against the dollar, up 4 paisa on the overnight level for buying and 3 paisa for selling. In the kerb, the trading was range bound on July 14, on balanced demand and supply position. The rupee/dollar parity was unchanged.
It was stable at its previous weekend level of Rs58.30 and Rs58.35. However, on July 15, the rupee came under slight demand pressure and lost 3 paisa versus the dollar to change hands at Rs58.33 and Rs58.38. Declining trend in rupee value persisted on July 16, when the rupee lost 12 paisa for buying and 17 paisa for selling on rise in demand. At close the dollar was trading at Rs58.45 and Rs58.55, its highest level during the week. The rupee traded unchanged at its overnight level on July 17, amid falling demand. On July 18, higher inflows helped the rupee to stage a sharp recovery making gains of 15 paisa over the overnight levels. AT close the dollar was trading at Rs58.30 and Rs58.45. Over the week, however, the rupee was still lower by 15 paisa on buying and 20 paisa on selling.
Against the euro, the rupee remained fluctuated. The week opened on a positive note making 5 paisa gain on July 14, which helped euro to change hands at Rs65.35 and Rs65.65. On July 15, the rupee failed to maintain its firmness over the euro and shed 30 paisa to trade at Rs65.65 and Rs65.95. However, the rupee made a sharp recovery on July 16, and gained 80 paisa over its overnight level to trade at Rs64.84 and Rs65.14. On July 17, the rupee lost 55 paisa versus the euro, reverting to its previous weekend’s level of Rs65.40 and Rs65.70. The euro lost 40 paisa on July 18, and trade at Rs65.0 and Rs65.30 against the rupee. During the week the rupee gained 40 paisa against the dollar.
In the international financial market, the dollar stuck in narrow ranges against major rivals on July 14, in a fairly technically driven market, unable to make much headway in anticipation of Federal Reserve Chairman Alan Greenspan’s semi-annual testimony before Congress this week. In New York the euro bought $1.1296, up 0.09 per cent from previous New York close. The single currency bought 132.69 yen, down 0.32 per cent. The dollar traded 0.23 per cent lower at 1.3722 Swiss franc. Against the yen, the dollar was down 0.3 per cent at 117.49 yen.
Sterling took aim at recent two-month lows against the dollar and lost some ground versus the euro as markets fretted that weaker than expected producer data could herald further interest rate cuts. It traded down 0.16 per cent from previous week’s close versus the dollar at $1.6279. It hit as low as $1.6277 earlier in the day, less than a cent away from last week’s two-month low of $1.6214. Versus the euro it was down 0.16 per cent at 69.331 pence.
The dollar rose to its highest level in at least two months against major currencies after Federal Reserve Chairman Alan Greenspan predicted the US economy would revive. As a result of investors rediscovering an appetite for riskier assets, the currencies of countries that have benefited from safe-haven buying of government debt — most notably the euro and the Australian and Canadian currencies — have fallen sharply. The euro fell as far as $1.1158 hovering just above that level at the end of the US session, its lowest since May 1 and down 1 per cent from its prior US close. The Swiss franc tumbled to its lowest since April 22, hovering near 1.3865 francs to the dollar at the close of the US dealings. The British pound was hobbled by an unexpected reduction in interest rates by the Bank of England, hitting a 1-1/2 month low against the dollar at $1.5907.
A surprise interest rate cut from the Bank of Canada sent its currency reeling to a two-month low against the dollar, which trade near C$1.3915 at the close. In conjunction with the dollar rally, the US 10-year Treasuries prices fell, fuelling the biggest one-day rise in yields in six months. Benchmark yields rose to 3.93 per cent from 3.73 per cent, as Greenspan downplayed the prospect of radical policy measures to counter deflation. The dollar, however, was unable to make headway against the yen. The Japanese currency has benefited from a rally in Japanese benchmark shares and building expectations that Japan’s moribund economy may soon recovery from prolonged stagnation. Against the yen, the dollar gained 0.14 per cent on the day to stand near 117.87 yen. The euro bought 131.80 yen down 0.75 per cent on the session.
Sterling extended earlier losses to one-month lows on the euro as upbeat eurozone confidence data buoyed the single currency across the board, while falling UK inflation fanned talk of further rate cuts. It had fallen to 70.48 pence per euro, down more than three quarters of a per cent on the day. Against the dollar it hit a two-month low of $1.6047, down nearly half a per cent on the day. The pound also suffered losses; with the British currency hitting two-month lows below 189 yen.
The dollar relinquished a two-month high against the euro and Swiss franc after Federal Reserve Chairman Alan Greenspan failed to shed new light on the direction of the US economy. A day after investors sent the dollar on a broad rally against its major counterparts on Greenspan’s cautiously upbeat assessment, the currency dipped modestly as traders took profits.
At the end of the US session, the euro settled above $1.12, up 0.35 per cent from the previous day’s close. The single currency also gained 0.53 per cent against the yen to trade near 132.50 yen. Against the Swiss franc, the dollar fell 0.70 per cent to trade at 1.3754 francs. But the dollar advances modestly against the yen to close above 118 yen, as traders feared Japan might be selling its currency to curtail its strength.
Sterling set a three-month low versus the dollar and matched the previous session’s one-month low versus the euro on the back of rising speculation that Bank of England might cut interest rates again. It was off the three-month low of $1.5857 set earlier in the day. Against the euro, it matched the previous session’s one-month low of 70.48 pence. Sterling’s recent bout of misfortune began last week when the Bank of England unexpectedly cut interest rates by a quarter point. This week, consumer and producer inflation data releases undershot analyst forecasts, fanning expectations the Bank of England will ease again.