Dollar robust against rupee
On the opening day of the week, the bank-led dollar-buying in the inter-bank market pushed the rupee down by three paisa for buying and two paisa for selling versus the dollar. The dollar changed hands at Rs59.95 and Rs59.96 on February 20, after breaching Rs60 mark in the early trading session. The rupee had closed the previous week at Rs59.92 and Rs59.94.
The downtrend in the rupee/dollar parity persisted on February 21, as the rupee slipped further against the dollar, once again hitting above the crucial resistance level of Rs60, last reached 16 months back on November 5, 2004. At the end of the second day, the dollar was seen changing hands at Rs60.02 and Rs60.04 after the rupee shed seven paisa for buying and eight paisa for selling due to the increased corporate demand and central bank dollar buying.
Slight improvement in the dollars’ supply on February 22 helped the rupee gain three paisa over its overnight level, amid continued dollar demand, and made the dollar trade at Rs59.99 and Rs60.01. On February 23, the rupee extended its gains, and picked up four paisa more to trade at Rs59.95 and Rs59.97 versus the dollar.
Timely intervention and increased inflow of remittances rescued the rupee from further decline against the dollar on February 24. The rupee posted a sharp gain of seven paisa and traded at Rs59.88 and Rs59.90 in the inter-bank market. During the week, it managed to recover four paisa against the dollar, amid sharp fluctuations. After breaching 16-month lows versus the dollar by mid-week, the rupee retrieved to its previous weekend position before the close of the week in review.
Amid tight supplies of the greenback and persistent increase in dollar demand in the open market, the rupee shed two paisa for buying and another five paisa for selling versus the dollar, which traded at Rs59.90 and at Rs60.00 on the opening day of the week, as compared to last week close of Rs59.88 and Rs59.95.
The downtrend in the open market continued on February 21. The rupee lost another 10 paisa for buying and five paisa for selling on the second day of trading, changing hands at Rs60 and Rs.60.05 against the dollar. However, despite rising demand for dollar on February 22, the rupee managed to hold ground versus the greenback, which traded unchanged at its overnight level.
On February 23, the rupee failed to maintain its firmness and lost 10 paisa to trade at Rs60.10 and Rs60.15 due to increased dollar buying. On February 24, five paisa gain was seen in the value of the rupee against the dollar as it traded at Rs60.05 and Rs60.10 in the open market. The rupee has been under pressure this week despite improved inflows of remittances because of the rising corporate demand and dollar buying by the central bank. The rupee lost 17 paisa in the open market this week.
Versus the euro, the rupee managed to gain 10 paisa, changing hands at Rs71.35 and Rs71.45 on February 20, against last weekend’s Rs71.25 and Rs71.35 It, however, gained 25 paisa on February 21 and traded at Rs71.10 and Rs71.20 as the single European currency shed its value versus the greenback in the world markets.
On February 22, the rupee maintained its overnight levels, trading unchanged at Rs71.10 and Rs71.20 versus the European single common currency. But this firmness versus the euro proved short-lived as the rupee lost 10 paisa on February 23 and traded at Rs71.20 and Rs71.30. On February 24, the rupee remained unchanged for buying, but shed ten paisa for selling to trade at Rs71.20 and Rs71.40 against the euro. The rupee managed to recover five paisa over the previous week close.
In the world markets, the dollar slipped against the euro on February 20, but traders said the US currency was supported after mixed data late last week did little to alter views that the Federal Reserve will keep bumping up interest rates. The dollar had retreated against the single European currency last weekend after a softer-than-expected US consumer sentiment survey suggested inflation was still a threat.
Market players said that the dollar would continue to benefit from expectations that the US overnight rates will rise at the Fed’s meeting in March and probably again in May. The trade was thin on the opening day of the week, given slim pickings for economic data and with many US traders seen taking a day off as markets were closed for the President’s Day holiday.
In Tokyo, The euro was buying $1.1965, up from around $1.1940 in late US trade last week close. The dollar edged up to 118.15 yen from around 118.05 yen. It had climbed around 0.5 per cent in the previous session after the yen failed to gain on gross domestic product data that showed robust Japanese growth in the October-December quarter. The dollar had slipped a quarter per cent on the day to 1.3069 Swiss francs. Sterling was up 0.10 per cent against the dollar at $1.7432.
Traders said that the dollar was capped above 118.50 yen, where the Japanese exporters are seen lined up to sell the US currency. The dollar rallied around 15 per cent against both the euro and the yen in 2005 on rate rises by the Fed that strengthened its rate advantage. But so far this year the dollar is flat against the yen and down by one per cent against the euro.
On February 21, the dollar strengthened in quiet trade, as minutes from the Federal Reserve’s January 31 policy-setting meeting preserved market expectations for more US interest rate increases.
This provided enough of an excuse for traders to lock in profits on the dollar’s earlier intraday gains, so the greenback exited active New York trading slightly off its session highs.
The currency market’s trading was extremely quiet with the major currencies hugging in narrow range. Traders’ focus was fixed on the FOMC minutes, but they contained few real surprises, ensuring only a mild response from the dollar. The euro was trading around $1.1912, little changed from where it was just before the FOMC minutes were released but still down around 0.2 per cent on the day.
The dollar was at 118.73 yen, up 0.4 per cent on the day and also little changed from levels just before the minutes came out. The dollar was flat against the Swiss franc at 1.3080 francs, while sterling was up slightly at around $1.7460.
On February 23, the dollar recouped some of its losses against the yen and the euro as comments from Federal Reserve officials did not dispel the market’s belief that the US interest rates have more room to rise. The dollar clawed back some lost ground against the yen which gained over one per cent after the Bank of Japan Governor Toshihiko Fukui overnight suggested the bank may shift to a tightening bias. But Fukui later backtracked on those remarks, allowing the dollar to regain some of its perceived yield advantage.
In New York, the dollar was last quoted at 117.18 yen, according to Reuter’s data, still down over 1.0 percent on levels late on February 22, but up from earlier lows around 116.79 yen. The euro also lost some ground to the dollar, reversing the rally triggered by Germany’s closely-watched the Ifo business sentiment index, which hit a 14-year high in February. The euro was last at $1.1913, virtually flat against the dollar, but down over one per cent against the yen at 139.64 yen. Against the Swiss franc, the dollar was down 0.1 per cent at 1.3093 francs, while sterling was up 0.5 percent at $1.7508.
At the close of the week on February 24, the yen surged to one-month highs against the dollar and the euro, extending a rally after the Bank of Japan Governor Toshihiko Fukui gave his strongest signal yet the central bank will eventually raise interest rates. Adding fuel to the yen’s gains was a report in Japan’s Yomiuri newspaper that the BoJ was considering the possibility of dismantling its policy of flooding the money market with excess funds as early as its March 8-9 meeting.
The yen had jumped more than one per cent against the dollar after Fukui said the BoJ’s super easy policy was coming to an end and that rates would rise to a “neutral” level step by step. The dollar tumbled to 116.42 yen on electronic trading platform EBS, it’s weakest since January 27, before recovering to around 116.65 yen.
The single currency was little changed at $1.1920. Some traders said the US currency would find support around 116 yen, where Japanese importers were seen lined up to buy the dollar. Sterling fell against the dollar. It was down 0.22 percent on the day against the dollar at $1.7482, after hitting its strongest level since February 10 at $1.7556 a day earlier.