Rupee weakens against dollar
In the inter-bank market the rupee was seen changing hands at Rs60.26 and Rs60.28 on June 19, against last week’s Rs60.20 and Rs60.22. Heavy rush for dollar-buying pushed the rupee sharply lower. Different banks reportedly bought nearly $30-40 million to meet payment requirements during the day.
Strong inflows of dollar helped the rupee to retain its value on June 20. The rupee did show any change in its overnight levels and traded at Rs60.26 and Rs60.28. Firmness prevailed in the inter-bank market on June 21. The rupee/dollar parity remained unchanged for the third day in a row. The rupee traded at Rs60.26 and Rs60.28 in the inter-bank market.
On June 22, the rupee managed to recover slightly gaining one paisa to trade at Rs60.25 and Rs60.27. The rupee was able to recover further ground versus the dollar on easy supply of dollar on June 23, maintaining its gains versus the dollar and picking up another four paisa to trade at Rs60.21 and Rs60.23. During the week in review, the rupee lost one paisa in the inter-bank market versus the dollar.
In the open market, the rupee lost five paisa in relation to the dollar on the opening day of the week and traded at Rs60.42 and Rs60.47 on June 19, against previous week close of Rs60.38 and Rs60.42.The rupee continued its downtrend versus the dollar on June 20. It lost another eight paisa for buying and 13 paisa for selling to trade at Rs60.50 and Rs60.60 on high demand for dollar in the open market.
Falling trend persisted in the open market on June 21, as the rupee shed another 15 paisa for buying and 10 paisa for selling on the third day of the week in review, changing hands at Rs60.65 and Rs60.70 on increased demand by the corporate sector. On June 22, however, the rupee maintained its overnight level against the dollar for buying but lost five paisa for selling to trade at Rs60.65 and Rs60.75.The rupee further lost four paisa in relation to the greenback to trade at Rs60.69 andRs60.79 on June 23. Over the previous week close the rupee in the open market lost 31 paisa for buying and 38 paisa for selling versus the dollar this week.
Versus the European single common currency, the rupee gained 15 paisa versus the euro on June 19 to trade at Rs76.05 and Rs76.15 against last week close Rs76.20 and Rs76.30. The rupee further gained five paisa versus the euro changing hands at Rs76.00 and Rs76.10 on June 20. On June 21, however, the euro shrugged of the weakness versus the rupee, recovering 40 paisa against the rupee, which was seen trading at Rs76.40 and Rs76.50.
On June 22, the euro extended its overnight gains, picking up 24 paisa and traded at Rs76.64 and Rs76.74. However, on June 23, the rupee managed to recover versus the euro gaining 31 paisa to trade at Rs76.23 and Rs76.33. During the entire week, the rupee lost three paisa versus the European single common currency.
In the international financial markets, the dollar climbed across the board on June 19, buoyed by expectations that the Federal Reserve will keep raising interest rates to quash the risk of higher inflation.
In New York trading, the euro was down around 0.5 per cent on the day at $1.2580, while sterling was also down half a per cent at $1.8410. The dollar rose 0.7 per cent against the Swiss franc to 1.2400 francs, and 0.2 per cent against the Japanese currency to 115.40 yen, having hit an eight-week high earlier in the day of 115.78.
Against the yen, the euro was down 0.3 per cent at 145.20 yen, retreating from a peak of 145.86, the strongest since the single currency was launched in 1999.
On June 20, the dollar fell against the yen after the Bank of Japan chief signalled the Japanese central bank could raise interest rates for the first time in around six years as soon as July. The dollar was barely moved against most other currencies, with little reaction to data that showed the pace of US housing construction rose a little faster than expected in May.
Given signs that Japan’s economy is on a solid recovery track and after nearly a decade of deflation, Fukui helped reinforce a view that the BoJ was ready to nudge rates up from virtually zero in July or August. The yen’s gains against the dollar were kept in check by expectations that any rate rises by the BoJ will be very gradual, while the Federal Reserve will raise rates next week and possibly again in August, extending its rate advantage over other major currencies.
In late New York trading, the dollar traded down 0.5 per cent on the day at 114.90 yen, around one yen below eight-week highs of 115.77 yen hit a day earlier. The euro was down 0.5 per cent against the yen at 144.60 yen, falling from previous day’s record high of 145.86 yen. The euro was little changed on the day around $1.2570, well off one-year highs around $1.2980 hit earlier this month.
After falling for most of the year, the dollar has rallied this month, rising almost two per cent against a basket of six major currencies. Signs of an uptick in inflation and a series of hawkish comments from Fed officials have put to rest speculation that the Fed may be ready to take a break after lifting interest rates 16 straight times since June 2004.
On June 21, the dollar fell against the euro after the European Central Bank’s president suggested that interest rates will have to be pushed higher to fight inflation in the 12-nation euro zone. Jean-Claude Trichet said in testimony before the European Parliament that euro zone economic growth was on a firm footing and that interest rates remained low, backing expectations that the ECB will raise rates again from 2.75 per cent.
Trichet’s comments support the overall view the ECB will continue to raise rates.
The ECB raised rates by 25 basis points last month, keeping to a pattern of a quarter-percentage-point increase every three-month period since December.
In New York, the euro was up 0.6 per cent on the day against the dollar at $1.2660, but still well short of one-year highs around $1.2980 struck earlier in the month.
Against the yen, the euro was up 0.6 per cent at 145.35 yen, having hit 145.86 on June 19, the highest since the currency’s 1999 launch. The dollar fell 0.1 per cent against the yen to trade at 114.75 yen.
The Fed is seen raising interest rates a quarter percentage points to 5.25 per cent in its 17th straight rate rise, but investors are waiting for any signs that the Fed is worried enough about inflation to follow with another hike in August. With the market already pricing in a better-than-even-money chance of another rate rise in August, the dollar’s upside could be limited, some analysts said.
On June 22, the dollar jumped to a two-month high against the yen and rallied across the board as mounting expectations of higher US interest rates lured investors away from emerging market currencies.
The Japanese currency slumped to a record low against the euro and fell sharply against the dollar, hurt by persistent speculation that Bank of Japan Governor Toshihiko Fukui may resign over an investment scandal.
Against the dollar, the euro fell to $1.2575, down 0.7 per cent in late New York trade, having earlier hit a two-week high of $1.2680. The New Zealand dollar dived 1.8 per cent to $0.6090. The dollar shot up 1.1 per cent to 116.15 yen, its biggest daily rise in a month, after surging to just below 116.30 yen, its highest in two months. The euro climbed half a per cent to 146.15 yen and touched 146.30 yen, the highest level since the euro was launched in 1999.
The yen was also under pressure after Fukui said that the central bank had made clear it would not raise interest rates quickly from virtually zero, the lowest in the developed world. Sterling tumbled 1 per cent to a seven-week low against the dollar, trading at $1.8280.
At the close of the week on June 23, the dollar hovered near a two-month high against the yen ahead of an expected bump up in US interest rates next week and on caution over the fate of Bank of Japan Governor Toshihiko Fukui. The yen’s outlook remained clouded due to the controversy over Fukui’s investment years ago in an equity fund run by a financier who was indicted on Friday on suspicion of insider trading.
The dollar was at 116.05 yen edging down from late US trade on Thursday, when it shot up over 1 per cent. The euro slipped to 145.90 yen from around 146.05 yen in late US trade. Against the dollar, the single European currency was little changed at $1.2575. The dollar rose to a two-month peak of 116.29 yen on electronic trading platform EBS on Thursday, while the euro powered to a record high of 146.30 yen.