In subdued trading on July 4, however, the rupee recovered some ground as dollar selling by exporters was sufficient to meet the importers’ demand in the currency market. Upward trend was seen in the inter-bank market where the rupee managed to gain three paisa against the dollar to trade at Rs59.62 and Rs59.65 compared to previous week close of Rs59.65 and Rs59.68.
On July 5, the dollar was still in demand as the corporate sector was active. However, range-bound trading was seen in the inter-bank market as the rupee recouped early losses on easy supply of dollars, shedding only two paisa on buying to trade at Rs59.64 and Rs59.65.
On July 6, demand for dollar persisted by the importers but some improvement in the dollars’ supply position supported the rupee. But increased inflows of remittances and foreign investments in the country prevented the rupee from sharp fall versus the US currency. As a result a steadier trend was witnessed and the rupee inched up after making one paisa recovery versus the dollar for buying and selling at Rs59.63 and Rs59.64.
Inflows of the US currency further helped the rupee-dollar parity to hold its overnight level on July 7. The rupee maintained a firm look since the new fiscal started as a result of the matching supply of the US currency with market demand and the dollar remained traded at Rs59.63 and Rs59.64.
Strong dollar supply helped the rupee to recover its lost ground versus the US currency in the inter-bank market on July 8, gaining four paisa for buying and selling at Rs59.58 and Rs59.60. Slackened demand for dollars and rising trend in the country’s remittances boosted the rupee’s value. Over the previous week close, the rupee recovered four paisa versus the dollar this week.
In the open market the rupee managed to hold ground versus the dollar and displayed some strength over the American currency this week. On the opening day of the week in review the rupee dropped by 15 paisa against the dollar changing hands at Rs60.45 and Rs60.50 over its previous week close of Rs60.30 and Rs60.35. But then the rupee did not show move any side versus the dollar and remained unchanged at Rs60.45 and Rs60.50, on July 5.
On July 6, the rupee again did not show any change versus the dollar and remained traded at Rs60.45 and Rs60.50. On July 7, the rupee held its overnight levels versus the dollar for the third consecutive day changing hands at Rs60.45 and Rs60.50 on balanced demand and supply. The rupee managed to hold its overnight levels versus the dollar for the fourth day in a row at Rs60.45 and Rs60.50 on July 8. Thus this week, the rupee ended unchanged over last week.
Against the European single common currency, the rupee continued its downtrend this week and lost 20 paisa on the first day of trading over Rs71.40 and Rs71.60 of the previous week close, changing hands at Rs71.60 and Rs71.80 on July 4. On July 5, the single European currency maintained its overnight levels versus the rupee at Rs71.60 and Rs71.80.
The rupee failed to show any improvement versus the euro on July 6 and lost 30 paisa for buying and selling at Rs71.90 and Rs72.10. The rupee was stuck in a tight range on July 7, as it did not move any side for the last two days versus the euro, remaining unchanged at Rs71.90 and Rs72.10.
On July 8, the rupee lost 10 paisa versus the euro for buying and selling at Rs72.00 and Rs72.20, respectively. But, at close it trimmed its losses, recovering the same amount for buying and selling at Rs71.90 and Rs72.10. Following a series of bomb blasts in London, the pound sterling lost sharply against the rupee, shedding 80 paisa in a single day slide for buying and selling at Rs104.90 and Rs105.15.
In the international financial market, the dollar maintained its steadier trend versus the major currencies following the strong US data factor. On July 4, trading was seen limited with US markets closed for the Independence Day holiday. In Tokyo the dollar hit a fresh 13-month high against the euro and a 14-month high versus the pound after strong US factory data last week cemented expectations for the Federal Reserve to keep raising interest rates.
The steady rise in US rates has sparked a powerful rally in the dollar this year, driving it up 12 per cent against the euro as Europe’s struggling economy and political upheaval have prompted investors to bail out of the single currency. The euro was down 0.25 per cent at $1.1930, after hitting a fresh 13-month low just above $1.1900. The pound was off 0.3 per cent at $1.7630 - down as much as 4fourper cent in the past week.
A mistaken trade stirred some early confusion in sterling after its fall accelerated through $1.7650. The trade took place all the way down at $1.7505, but dealers said they were calling sterling’s 14-month low around $1.7570. The dollar also pushed up near 111.90 yen to hit 11-month highs before retreating to around 111.55 yen.
On July 5, the dollar slipped off of a 14-month high against a basket of major currencies, as investors turned more cautious ahead of the US jobs report due on July 8. Volume rose with the return of the US traders to the market after a long holiday weekend as investors staked out positions in advance of weekend’s report.
The euro was trading at $1.1920, up 0.2 percent after having sunk as low as $1.1869 early in the European session, its lowest since mid-May 2004. Against the Japanese yen, the dollar earlier rose to 112.12 yen an 11-month high, and scored its highest levels since May 2004 against the Swiss franc and the pound. Sterling traded around $1.7580 after skidding to a 14-month low of $1.7569 on July 4.
On July 6, the dollar struck an 11-month high against the yen as oil prices climbed to a record, weighing on the outlook for Japan’s fragile economic recovery. Traders sold yen as the price of oil peaked above $60 per barrel, on the view that Japan’s heavy reliance on imported crude could snuff out recent signs that the world’s second largest economy was gaining steam.
The dollar, after hitting 11-month highs, was around 112.29 yen, up over 0.4 per cent from its overnight levels. Traders said a barrier option was at 112.50 yen and another was at 113.00 yen, and that might be containing a further rally. Against the dollar, the euro was trading at $1.1930, up 0.1 per cent.
Sterling cheered the choice of London as the host of the 2012 Olympic Games but investors’ bids quickly dried up as they fretted about a potential interest rate cut in Britain. Holding the Olympiad could help the British economy in the long term but, for now, weakening consumer spending is likely to convince the BoE to lower borrowing costs and diminish the pound’s yield appeal. It traded steady on the day at $1.7555. A move below $1.75 would bring sterling to its lowest level since the middle of May last year and a drop below $1.7477 would take it to a 1-1/2 year low.
On July 6, the dollar and sterling weakened while the Swiss franc benefited from safe-haven buying after a series of blasts in London killed at least 37 and wounded hundreds. Currency markets calmed down after an initial burst of activity following the explosions, with analysts looking to the US employment report for fresh market direction.
Meanwhile, a series of blasts ripped through London’s transport system during the morning rush hour as leaders of the Group of Eight major industrialized nations was meeting in Scotland. The euro was off earlier session highs of around $1.2040 and traded at $1.1945 by late afternoon, up 0.1 per cent from July 6.
Currency investors had initially sold the dollar against the euro after the London blasts, fearing the United States could become another target. The dollar pared its losses against the Swiss franc to 1.2984 francs, down 0.3 per cent from the previous day. Sterling was down 0.5 percent against the dollar at $1.7442, above an earlier 19-month low around $1.7403.
At the close of the week on July 8, the dollar regained its poise against the euro and the yen after initially falling on worries about similar attacks in the United States, with the June jobs report expected to bolster the case for more Federal Reserve rate rises.
The sterling hovered around $1.7420, down from $1.7446 in late New York trade and not far from a 19-month low near $1.7400 hit in the prior session. It has fallen more than five per cent in the past two weeks, with the blasts adding to the currency’s woes from speculation the Bank of England could soon lower interest rates. The euro bought $1.1930, down slightly after climbing over $1.20 on news of the attacks.