It commenced the week on a positive note in the inter-bank market, where bullish sentiment prevailed on the opening day of the week, as the rupee managed to recover seven paisa against dollar, trading at Rs60.26 and Rs60.27 on slight easiness in the supply of dollars on July 31, after closing last week at Rs60.34 and Rs60.36.
Firm trend was witnessed on the second day of trading as the rupee traded unchanged at its overnight levels of Rs60.26 and Rs60.27 on August 1. However, rising demand for dollars on the third day of trading pushed the rupee down. The rupee after displaying steadier trend in the first two days of the week under review, lost four paisa versus the dollar, which was seen changing hands at Rs60.30 and Rs60.31 on August 2.
On August 3, the rupee fluctuated in a narrow band versus the dollar and traded at Rs60.30 and Rs60.32, showing only one paisa decline on selling counter, as the dollars’ supply was comfortable, amid higher dollar demand. On August 4, dollars’ supply was comfortable. Corrective measures helped the rupee to retain its firmness versus the dollar. Marginal gain was seen in the inter-bank market, where the dollar traded at Rs60.29 and Rs60.31. During the week the rupee gained five paisa against the dollar in the inter bank-market. In the open market, the rupee opened the week on negative note, losing five paisa versus the dollar to trade at Rs60.80 and Rs60.85 on July 31, against last weekend’s Rs60.85 and Rs60.90. On August 1, the rupee fluctuated in the narrow band, remaining unchanged in terms of the dollar, which continued to be quoted at Rs60.80 and Rs60.85.
The rupee, however, recovered five paisa after gaining some strength versus the US currency on August 2, when the dollar was seen changing hands at Rs60.75 and Rs60.80. The rupee further gained three paisa against the dollar and traded at Rs60.73 and Rs60.78 on August 3. The rupee further extended its firmness over the dollar for the third day in a row, recovering another three paisa to trade at Rs60.70 and Rs60.75. It recovered 15 paisa against the dollar in the open market this week.
Versus the European single common currency, the rupee managed to gain 16 paisa on the first day of the week changing hands at Rs76.97 and Rs77.07 on July 31. Last week the rupee had closed at Rs77.13 and Rs77.23 against the euro. On the second day the rupee further picked up 13 paisa and traded at Rs76.85 and Rs76.95. The rupee, however, lost 15 paisa and traded at Rs77.00 and Rs77.10 on the third day as the single European currency looked ahead on the back of dollar’s weakness in the international markets.
But on the fourth day the rupee managed to recover its firmness versus the euro, and gained 30 paisa to trade at Rs76.70 and Rs76.80. On the fifth day of trading during the week in review, the rupee unable to maintain its overnight firmness and shed nine paisa versus the euro to trade at Rs76.79 and Rs76.89. Over the previous week, the rupee, however, managed to recover 34 paisa against the euro this week.
In the international financial market, the dollar was slightly softer on July 31 but recovered from a near three-week low against the yen as the market retained its view that the Federal Reserve will probably leave rates unchanged next week.
The greenback fell to a three-week low against a basket of currencies as the dollar-negative effect of last week’s soft report on second-quarter US economic growth lingered.
Overall, while the dollar was little changed it had been sold off aggressively after the previous weekend’s growth data. That helped reduce market expectations of a Fed interest rate hike next week and could keep the dollar under pressure. The euro was up marginally at $1.2764, while the dollar was largely flat at 114.62 yen, having reversed earlier losses that took it to a session low of 114.17.
This reversal came largely from a rise in the euro, which was last up nearly 0.1pc at 146.36 yen, having recovered from a three-week low of 145.69. Earlier the yen had gained sharply after Japanese June industrial production data outstripped forecasts, adding credence to the view that Japan’s economy is picking up. Sterling was up 0.2pc at $1.8679, while against the Swiss franc the dollar was down nearly 0.2pc at 1.2305 francs.
On August 1, the dollar fell broadly as a wave of technical selling offset gains made on robust US economic data and fairly bullish comments from the new US Treasury chief. A wave of short-covering in the euro was triggered after a dollar rally stalled at resistance around $1.2710. The selling helped push the greenback to near one-month lows versus the euro and two-month lows against sterling. It had climbed on data showing US manufacturing and inflation accelerating, which helped support the view that the Federal Reserve could raise interest rates again next week.
The dollar initially drew support from US Treasury Secretary remarks, who reiterated the US government’s strong dollar policy in his first public comments since taking the job last month. In New York, the euro was up almost 0.5pc on the day at $1.2820, narrowly off a near-one month high of $1.2823. Sterling was up 0.4pc at $1.8760, having reached $1.8763, nearly a two-month high. The dollar surrendered all its gains against the yen. It was last down 0.1pc at 114.51 yen, and was down over 0.4pc against the Swiss franc at 1.2262 francs.
On August 2, the dollar rose against the euro as investors reduced their exposure to the single currency in case the European Central Bank offers a less bullish outlook for eurozone monetary policy. The yen staged a short-lived rally earlier after China’s official news agency Xinhua quoted the Chinese central bank as saying it would pursue greater flexibility of the yuan to help cool its red-hot economy and tame inflation.
The euro was last at $1.2780, down nearly 0.4pc on the day, having touched a session high of $1.2835 earlier. Against the yen the euro was off 0.2pc at 146.61 yen. Earlier in the day, the dollar slipped against the yen when official Chinese news agency Xinhua quoted officials from the People’s Bank of China as saying it will increase structural adjustment, including more flexibility for the yuan to help cool its red-hot economy.
But in New York the dollar was marginally positive versus the yen at 114.63 yen, having dipped to 114.27. The market largely ignored a report on private sector employment that showed a slower pace of US job creation in July than forecast. Having badly missed predicting US payrolls in two of its first three months of release, the ADP National Employment Report has lost some of its ability to guide market expectations for Friday’s full employment report, analysts said. Sterling was roughly unchanged at $1.8761, having retreated from a session peak of $1.8795, its highest for a month. On August 3, the dollar reversed course and rose against most major currencies in a technical rebound as investors took profits on trades made after the European Central Bank raised interest rates. The big exception was sterling, which remained firm across the board after the Bank of England surprised markets by raising UK interest rates by a quarter percentage point. Earlier in the day, the euro nosed one-month highs against the dollar after ECB President said monetary policy remained accommodative and further tightening may be needed. That forced investors to price in at least two more hikes this year.
In New York, the euro was flat against the dollar at $1.2794 but still up 0.4pc against the yen at 147.26 yen. The dollar was up 0.3pc against the yen at 115.09 yen. Against the Swiss franc, it rose 0.1 percent to 1.2316 francs. Sterling climbed to 11-week highs against the dollar at $1.8914 and to 2-1/2 month highs against the euro. Later in the day, it had trimmed those gains to trade up 0.4pc at $1.8854 and the euro was down 0.5pc at 67.78 pence. At the close of the week on August 4, the dollar steadied as investors looked to US jobs data later in the session for clues to whether the Fed will raise interest rates for an 18th straight time at its meeting next week. Mounting expectations that the Fed will soon pause its two-year string of interest rate rises had driven the dollar to one-month lows against a basket of currencies. With investors split over whether the Fed will move, the jobs data is the last major piece of news before the central bank decides whether to continue its series of quarter-point rate rises, which would take the key rate to 5.5pc.
The focus on the jobs data and Fed comes just a day after the European Central Bank raised rates to three per cent as widely expected and signalled more tightening may be needed, while the Bank of England surprised with its own rate increase. The dollar edged up to 115.10 yen in Tokyo, buoyed by some unwinding of short dollar positions ahead of the jobs data, traders said.
The euro was little changed at $1.2800, down from its previous day’s intraday high of $1.2835 on electronic trading platform EBS. Against the yen, the single European currency edged up to 147.35 yen from 147.20 yen and was in sight of an all-time high of 148.07 yen struck last month.
In London, the euro lost some of the ground gained after the European Central Bank raised interest rates and cemented expectations of further monetary tightening in the eurozone. The dollar was 0.4pc firmer at 115.42 yen. Against a basket of currencies, the dollar edged up to 85.22 after previous day’s one-month low of 84.86. The euro was 0.1pc down on the day against the dollar at $1.2786, but up 0.2pc against the yen at 147.59.