On the first day of trading, the rupee shed six paisa versus the dollar in the inter bank market and traded at Rs59.64 and Rs59.66 against previous weekend’s levels of Rs59.55 and Rs59.60. On July 12, firmness prevailed in the market as the rupee maintained its overnight level at Rs59.64 and Rs59.66.
Maintaining its firmness, the rupee further gained two paisa on July 13, when the rupee/dollar parity was quoted at Rs59.60 and Rs59.62. The rupee further posted a gain of two paisa over its preceding day’s rate, changing hands at Rs59.58 and Rs59.60 in modest trading on July 14.
However, towards the close of the week, the rupee unable to maintain its firmness over the US currency lost two paisa on the buying side to trade at Rs59.60. It slid three paisa for selling at Rs59.63 on July 15. In the inter bank market, the parity this week lost almost five paisa for buying and three paisa for selling over previous week close.
In the open market, the rupee traded at Rs60.45 and Rs60.50 on the week’s opening day after shedding two paisa versus the dollar against previous week close of Rs60.44 and Rs60.48. On the second day of the week in review, the rupee in the open market did not show any change versus the dollar and traded at its overnight levels of Rs60.45 and Rs60.50.
The rupee remained stable versus the dollar trading at Rs60.45 and Rs60.50 on the third and fourth days of the week in review. On July 15, the parity almost maintained its overnight levels in the open market, as the rupee remained unchanged in relation to the dollar at Rs60.45 and Rs60.50.
Against the euro, the rupee lost 25 paisa for buying at Rs72.45 and slid 10 paisa for selling at Rs72.50 on July 11, compared to last week’s levels of Rs72.20 and Rs72.40. On the following day, the European single common currency maintained its firmness over the rupee. The rupee lost nearly 95 paisa on July 12, changing hands at Rs73.30 and Rs73.60 versus the euro.
The euro extended its gains versus the rupee on July 13 and picked up 20 paisa trading at Rs73.50 and Rs73.80. But it failed to retain its firmness versus the rupee on July 14, tracking the international market direction, and lost 60 paisa against the rupee to trade at Rs73.05 and Rs73.20.
The rupee was nearly inert versus the euro at Rs73 and Rs73.20 on July 15. The rupee, however, lost 55 paisa for buying and 70 paisa for selling against the euro this week.
In the international financial markets, the dollar fell across the board on the opening day of the week in review, as markets looked cautious to US May trade data. The gaping US trade deficit was a key factor that pushed the dollar into a three-year decline through the end of 2004, but the rising US interest rates have fuelled a greenback rally in the first half of 2005.
On July 11, the euro was trading at $1.2070, up 0.8 per cent, after hitting a 14-month low of $1.1866 last week. Against the Swiss franc, the dollar was trading down 0.8 per cent at 1.2875 francs. Against the Japanese yen, the dollar was down 0.4 per cent at 111.77 yen.
Meanwhile, sterling rebounded as the market saw a limited economic impact from last week’s deadly bombings in London. It recovered from last week’s 19-month low in the aftermath of previous week attacks, trading up 1.1 per cent at $1.7570.
On July 12, the dollar fell steeply to its lowest against the euro in almost a month, its decline triggered by a below-consensus US employment report last week. In New York trade, the euro was up 1.4 per cent from the opening day at $1.2240. It had traded up to $1.2256, the highest since June 17 and a move marking its biggest one-day climb since that day.
Against the Swiss franc, the dollar lost 1.3 per cent to 1.2702 francs and was down 0.8 per cent against the yen at 110.87 yen. Sterling posted its biggest one-day gain in five months, trading up over one per cent to $1.7780. The Australian dollar also racked up its biggest single-day gains since mid-February to trade at $0.7570.
On July 13, the dollar rallied after the latest US trade data and White House budget forecasts suggested the “twin” current account and budget deficits are being reigned in. The narrower-than-expected trade deficit in May of $55.35 billion eased concerns about the country’s ability to fund its current account gap and should boost second-quarter growth.
The government slashed its fiscal year 2005 budget gap prediction by almost $100 billion later in the day, which cemented the dollar’s gains. The dollar was primed for a rebound, having tumbled steeply the previous day.
In late trade, the euro lost 1.2 percent at $1.2088, while sterling was down at $1.7632. The dollar gained one per cent against the yen at 111.91 yen and posted its biggest one-day gains against the Swiss franc in more than seven moths, trading at 1.2901 francs.
So far this year, the dollar has shrugged off its structural drags such as the current account deficit, and has gained about 8.5 per cent versus a basket of currencies as investors have sought to benefit from the rising US interest rates.
On July 14, the dollar drifted mostly higher after a strong US retail sales report suggested the US economy remains on a solid footing and cemented the view that interest rates will continue to rise. A surprisingly strong 1.7 per cent surge in retail sales last month points to an economy supported by strong consumer spending and suggests the Federal Reserve will stick to its policy of steady rate increases.
A good deal of currency trading was driven by activity in the euro/yen cross. At various points in the session, that pair’s rise to almost 136.00 yen lifted euro/dollar and dollar/yen higher. The euro traded at $1.2081 down slightly from previous day, while sterling was down 0.5 per cent at $1.7557.
The dollar was up 0.4 per cent against the yen at 112.29 and firmed slightly against the Swiss franc to 1.2901 francs. In London, sterling was down 0.15 per cent against the dollar at $1.7612. Earlier in the session it fell as low $1.7564. But it was still up from levels hit in the aftermath of last week’s attacks on the London transport system that killed more than 50 people.
At the close of the week on July 15, the dollar held firm, a day after a strong retail sales report added to a string of upbeat news on the US economy and suggested the Federal Reserve would keep raising interest rates at a steady pace. The retail sales figures came on the heels of data showing improvement in the giant US trade and budget deficits that have long dogged the currency.
On Tokyo market, dollar sentiment was very strong. In mid-day trading, the euro bought $1.2105, up slightly from its level in late New York trade, but still well below a one-month high of around $1.2255 hit on July 12. It hit 14-month lows near $1.1870 last week. The euro has fallen 11 per cent against the dollar this year partly on worries the European Central Bank could soon cut rates.
On the other hand, sterling was 0.2 per cent higher at $1.7595, well above a 19-month low of $1.7310 hit after the London bombings. Against the Japanese currency, the dollar fetched 112.20 yen, after rising as far as 112.40 yen - just short of 14-month highs above 112.60 yen.