Continued large inflows of remittances from abroad and a favourable balance of payments position besides other positive factors this year have significantly improved dollar supply position and strengthen the local currency.
The local currency market this week witnessed mixed trend, with the rupee dollar parity moving in a narrow range. In the inter-bank market however, the rupee opened the week on a negative note moving down slightly against the dollar on August 18, over the previous weekend level. The dollar changed hands at Rs57.79 and Rs57.80 during the day, reflecting one paisa loss in rupee value.
As the demand for dollar persisted in the inter-bank market, the rupee extended further losses of 3 paisa on August 19 and 2 paisa on August 20, to trade at Rs57.82/83 and Rs57.84/85 respectively in the two trading sessions. On August 21, the rupee managed to recover 2 paisa after the central bank lent support to rupee in the open market to help narrow the gap between inter-bank and open market parity. The rupee traded at Rs57.82 and Rs57.84 against the dollar. Finally the rupee in the inter-bank market ended the week on a firm note gaining another 2 paisa to trade at Rs57.80 and Rs57.82 versus the dollar on August 22, only.
In the kerb trading the central bank support to the local currency helped the rupee to extend winning streak this week. The rupee gained 10 paisa on the week’s opening day, changing hands at Rs58.0 and Rs58.10 versus the dollar. However, in the following days, it failed to maintain its firmness against the dollar and assumed a falling trend on continued rise in demand for dollar. Payments requirements exerted pressure on the rupee in the last four days, with the rupee shedding 25 paisa. The rupee closed the week on August 22 at Rs58.25 and Rs58.35 against the dollar, down 15 paisa over the previous weekend close.
Euro faced sharp erosion in the world market this week. Against the euro, the rupee in the local market managed to touch its highest level during the week at Rs63.50 and Rs63.80 at the close of the week on August 22. Earlier the European single currency had opened the week on August 18, on a dismal note. During the week, the rupee suffered only one decline on August 20, when it lost 10 paisa versus the euro, which traded at Rs64.50 and Rs64.60 during the day. Despite this decline the rupee was able to gain 165 paisa versus the euro over the previous week end’s level of Rs65.15 and Rs65.30. Against other major currencies at the inter-bank forex counter the rupee failed to maintain its strength versus the British pound this week. It also weakened against the Japanese yen, the Malaysian ringgit, the UAE dirham, the Singapore dollar and the Korean won. However, it managed to show firmness versus the Canadian, Australian and New Zealand dollars, the Swiss franc, the Swedish krona, the Danish and Norwegian krones and the Kuwaiti dinar. The rupee was stable against the Hong Kong dollar, the Chinese yuan and the Saudi and Qatari riyals.
On the international front, the dollar rallied broadly on August 18, nearing a 3-1/2-month high against the euro and hitting a one-month high versus the Swiss franc as optimism over the US economic recovery triggered demand for the US currency. In the late US trading, the euro traded near $1.1150 against the dollar, down a per cent from its prior US close and a fraction of a cent from its lowest level since late April. The dollar also gained 1.31 per cent against the Swiss franc to stand near 1.39 francs in late dealings. Sterling, meanwhile, was pushed down by 0.45 per cent to trade near $1.59.
The greenback moved higher against the yen touching an 11-day high of 119.79 yen but retreating to trade near 119.50 yen in late trading. It was about 0.28 per cent higher on the day. The euro lost 0.75 per cent on the session against the yen, trading near 133.30 yen. Sterling was trading down a third of a per cent compared to its previous New York close and had fallen as low as $1.5898, its lowest level since July 21. Against the euro, the pound was up over a third of per cent on the day and near the day’s high of 70.18 pence.
On August 19, the yen rallied broadly as investors encouraged by signs of recovery in Japan and Tokyo’s benchmark stock index hitting a one-year high in the Asian trading bought the Japanese currency. For weeks, the Japanese currency has remained strong despite Japanese officials’ desire to keep it weak in order to prevent the currency’ strength from undercutting global demand for its exports, thus derailing a nascent economic recovery.
Against the yen, the euro bought 131.85 yen down 1 per cent on the session. The dollar reversed early gains against the yen to trade below 118.30 yen also off 1 per cent on the day. Meanwhile, the dollar reversed from a 3-1/2 month high against the euro, after deadly bombings in Iraq and Israel momentarily outweighed optimism that the US economy’s growth would outpace that of Europe. The euro traded above $1.1130 against the dollar in late dealings, off the session’s low at $1.1056 but still within view of its lowest since April 30. Versus the Swiss franc, the US currency fell off a three-month peak above 1.40 francs, trading near 1.3878 francs.
Sterling fell nearly half a per cent to its lowest level in nearly a month against the resurgent dollar as the greenback drew strength from optimism about US recovery prospects. The pound tussled with the euro to stand marginally firmer on the day as the single currency’s fall against the dollar left it on the back foot. In London, the pound was trading 0.4 per cent down on the day at $1.5844 after dipping to $1.5813 earlier. It is now some 10.5 cents below a 4-1/2 year high set in June. Against the euro it stood at 69.98 pence after touching its strongest level for over two weeks at 69.85 pence with the single currency brought low by the dollar’s resurgence.
On August 20, the euro weakened against the dollar and yen after France reported its economy contracted unexpectedly in the second quarter, raising fears the euro zone economy could slip into recession. It ended US trading hovering near $1.1115 against the dollar down about 0.20 per cent from its prior US close. Against the yen, the single currency fell to its lowest since July 15, trading near 131.30 yen.
Meanwhile, the dollar settled at 118.06 yen also its lowest since July 15 as increased selling of euro/yen weighed on the dollar/yen exchange rate.
On August 21, the euro sank to its lowest level in at least four months against the dollar and yen after Germany reported it had fallen into recession in the first half of 2003. The euro has been under pressure amid growing expectations that the United States economy will outpace that of Europe. Adding to that perception was France, which this week said its economy contracted 0.3 per cent in the second quarter. In late US trading, the euro changed hands around $1.0919 against the dollar, its lowest since April 22 and down nearly 2 per cent on the day.
Against the Swiss franc, the dollar soared to an eight-month high, trading around 1.4130 francs and up nearly 2 per cent on the session. Sterling, meanwhile, probed a four-month low against the dollar below $1.5776.