Easy dollar supply and less buying interest in the absence of major demand continued to support the rupee against the dollar in the local currency market. The parity in the inter-bank as well as in kerb moved in a narrow range mostly in favour of the rupee.
At one point during the week the gap between the inter-bank and open market rates was almost zero. At present, continued high inflows of dollar, rising foreign exchange reserves, growing current account surplus and increasing exports amid lack of demand are having positive impact on rupee-dollar parity.
In the inter-bank market, the parity has shown a steadier trend gaining 6 paisa over the dollar this week. It commenced the week at Rs57.39 and Rs57.41 on October 27, up 5 paisa against the dollar over the previous weekend close of Rs57.44 and Rs57.46. The parity ended the week almost unchanged at Rs57.38 and Rs57.40 on October 31, just up 2 paisa for buying and one paisa for selling compared to its overnight level.
At the same time, the parity in the kerb moved in a similar pattern. The rupee dipped 20 paisa in a single day trading on October 29, the highest fall against the dollar in the week, on high dollar demand. However, it managed to recover 30 paisa for buying and 15 paisa for selling, closing the week at Rs57.40 and Rs57.45 on October 31. At this level it reflected only 5 paisa gain for selling against the previous weekend level of Rs57.40 and Rs57.50.
Due to sliding Euro in the world currency market, the rupee managed to show upward trend this week against the European single common currency in the local currency market. It commenced the week at Rs67.05 and Rs67.25 versus the Euro on October 27 and closed at Rs66.60 and Rs66.80 on October 31, reflecting a cumulative gain of 70 paisa in five days trading. Euro had closed the previous week at Rs67.30 and Rs67.50.
Against other major currencies at the inter-bank forex counter, the rupee this week displayed strength against most currencies. Prominent among them were British pound, Japanese yen, Canadian and Hong Kong dollars, Swiss franc, Danish and Norwegian krones, Swedish krona, Malaysian ringgit, Thai bhat, Kuwaiti dinar, Saudi and Qatari riyals and UAE dirham. The rupee, however, remained week against Australian and New Zealand dollars. It was unchanged versus the Singapore dollar, Chinese yuan and Korean won.
On the international front, the dollar slipped against the yen on October 27, hurt by an overnight rally in Japanese stocks and amid expectations US treasury will implicitly encourage a weaker greenback at this week’s Senate testimony on foreign exchange. But the greenback rose versus the euro, drawing support from stronger economic prospects in the United States.
The Nikkei’s recovery overnight further buoyed the yen against the dollar after the Japanese stock market’s free fall last week. The Japanese currency strengthened to a near three-year high against the dollar as the Nikkei gained 1.15 per cent after a more than 6 per cent drop last week. As the yen firmed, the threat of Japanese yen-weakening interventions loomed larger. The greenback reacted little to a slight fall in US home sales to a seasonally-adjusted annual rate of 1.145 million.
In New York, the euro was down 0.4 per cent to $1.1735. Against the yen, the dollar was down 0.5 per cent to 108.56 yen. Against the Swiss franc the dollar was at 1.3184 francs, up 0.4 per cent on the day. The pound was virtually flat at $1.6942. The dollar has been on a losing streak against the yen and euro for much of the year, despite Japan’s purchases of the US currency in an effort to weaken the yen.
On October 28, after vacillating in the wake of the Federal Reserve’s decision to hold rates unchanged as expected the dollar extended gains against the euro, in a late rally fired by the rise in US stocks. But the greenback remained under pressure against the yen, threatening to retest three-year lows plumbed early in the global day.
In New York, the euro was down 0.7 per cent to $1.1669. Against the yen, the dollar was down 0.2 per cent to 108.25 yen. Against the Swiss franc the dollar was at 1.3305 francs, up 1.1 per cent on the day. The pound was nearly flat at $1.6966. The euro fell 0.95 per cent against the yen to 126.23 yen.
The dollar initially slipped against the euro after the Fed’s statement, before steadily recovering ground. Earlier in the US session, the dollar gained against some major counterparts after a surprise jump in US consumer confidence data, bolstering expectations that the economic recovery is gathering momentum. The pound touched its highest level for eight weeks against the euro taking advantage of general euro weakness and drawing support from expectations that British interest rates will soon rise. Sterling hovered almost a cent below a recent five-year high at $1.70.
On October 29, the dollar stabilized against the yen recovering from three-year lows during the session. The euro rose 0.1 per cent to $1.1671. Against the yen, the dollar was down 0.04 per cent to 108.24 yen. Against the Swiss franc the dollar was at 1.3296 francs, down 0.2 per cent on the day. The pound, fulled by expectations of higher domestic interest rates, climbed to a new five-year peak at $1.7082 earlier in the global day before falling to $1.6990.
The euro dipped to eight week lows against the yen to 126.13 yen in New York, buoyed by the single European currency’s gains against the dollar. Among the commodity currencies, the New Zealand dollar hit a fresh six-year high earlier above US $0.6150, before dropping to US $0.6117. Against the yen, the dollar was trading above its latest three-year low below 107.90 yen, with traders suspecting the bank of Japan might be quietly preventing further losses.
Sterling rose to five-year highs against the dollar and 3-1/2 month peaks on the euro as a record rise in UK consumer landing bolstered expectations of an imminent interest rate hike. The Bank of England said total consumer lending rose by a record 10.7 billion pounds last month, up 14.0 percent on the year. Most of this was made up of new home loans. Mortgage lending rose by 8.8 billion pounds, also the highest increase ever.
Sterling was already benefiting from expectations British interest rates would be raised soon from their current 48-year low of 3.5 percent after last week’s Bank of England minutes showed the Monetary Policy Committee voted by just five to four to leave interest rates steady at its October meeting. It was up 0.31 percent at $1.7020, but off the day’s peak of $1.7082, its highest since October 1998. Against the euro the pound was flat at 68.70 pence, after earlier hitting its highest since early July for a second straight day at 68.57. a move below 68.53 would be a six-month high.
On October 30, the dollar staged a relief rally climbing to session highs after Treasury Secretary testimony ended without addressing Japan and China’s currency policies head on earlier in the US session, the dollar started to come off lows against major rivals after US growth data for the third quarter overshot expectations, solidifying a a belief that recovery in the world’s biggest economy is on track. The dollar earlier got a boost from strong gross domestic product numbers and falling jobless claims, which affirmed expectations of more vigorous growth in the United States.
The euro was down 0.3 per cent to $1.1631. Against the yen, the dollar rose 0.4 per cent to 108.72 yen, rallying from three-year lows on October 29. Against the Swiss franc up 0.1 per cent on the day. The pound was down 0.2 per cent to $1.6952. Sterling neared recent five-year highs versus the dollar and six-month highs versus the euro on heavy expectations of a UK rate rise next week, but new of a surge in US growth later curbed the pound’s gains.
At the close of the week on October 31, the dollar rose pushing the euro to 10-day lows on upbeat US growth data and after US Treasury Secretary testimony ended without him taking a swipe at Japan for intervening in the forex market.