Later in the week, dollar supply improved, which helped the rupee to overcome its weakness versus the dollar. The rupee also moved both ways versus the European single common currency trading in a narrow range.
The rupee/dollar parity suffered fall in the local currency market on the opening day of the week as the rupee gave up it's weekend firmness against the American currency, amid short supply of dollars due to the closure of US financial market. Importers were seen in the currency market purchasing dollars to cover their requirements. The rupee shed three paisa on buying counter and another four paisa on selling counter on January 15, changing hands versus the dollar at Rs.60.98 and Rs61.00 against Rs60.95 and Rs60.97 of the previous week close in the inter bank market.
The rupee, however, traded range bound against the dollar on the second day of trading, as dollar supply position improved on the opening of the US financial market on January 16, after remaining closed on January 15 on account of Martin Luther Day holiday. The rupee recovered one paisa and traded at Rs.60.97 and Rs.60.99 against the dollar. There was still some demand pressure on the rupee.
Strong dollar supply on the third day of the week in review impacted favourably in the inter bank market with the rupee sharply gaining seven paisa for buying and another eight paisa for selling to trade at Rs60.90 and Rs60.91 against the dollar on January 17. Smart recovery was witnessed in the inter bank rupee/dollar parity on the fourth day of the week in review. The rupee gained six paisa against the dollar trading at Rs60.84 and Rs60.85on January 18.
On January 19, the rupee extended its overnight gains on strong supply of dollars and made further advances over dollar in the inter bank market. It managed to recover 11 paisa more on buying counter and 12 paisa on selling counter, changing hands at Rs60.75 and R.60.77 on the fifth day of trading. During the week in review, there was a cumulative gain of 20paisa in the value of rupee versus the dollar.
In the open market, the rupee was unable to hold its weekend firmness versus the dollar and shed four paisa on buying counter and two paisa on selling counter to trade against the dollar at Rs60.92 and Rs61.00 on the first day of trading during the week in review as compared to previous week close of Rs60.88 and Rs60.98. On January 16, it, however, managed to hold its overnight rate for buying while picking up one paisa on selling to trade at Rs60.92 and Rs60.99 on the second day of trading.
On the third day of trading during the week in review, the rupee continued its upward trend versus the dollar in the open market. It recovered four paisa for buying and one paisa for selling, changing hands at Rs60.88 at Rs60.98against the dollar on January 17. On the fourth trading day the rupee, however, lost four paisa on the buying counter, while keeping its overnight rate on the selling counter intact to trade at Rs60.92 and Rs60.98 versus the dollar on January 18.
In the open market, the rupee recovered two paisa on buying counter but remained intact at the selling counter for the third day in a row, trading, trading at Rs60.90 and Rs60.98 against the dollar on January 19. This week, the rupee in the open market lost two paisa for buying, while it did not show any change against the dollar for selling over the previous week close, amid fluctuations.
Versus the European single common currency, the rupee commenced the week on a positive note as it managed to extend its weekend firmness and further recovered 29paisa, trading at Rs78.29 and Rs78.39 against the euro on January 15 after closing last week at Rs78.58 and Rs78.68. However, the rupee failed to retain its firmness on January 16, and lost 11 paisa against the euro to trade at Rs78.40 and R.78.50.
On the third trading day, the rupee maintained a stable trend, holding its overnight sevels against the euro unchanged at Rs78.40 and R.78.50 on January 17. The rupee gave up overnight firmness against the euro on the fourth day of the week in review, when it lost 22 paisa versus the European single common currency and traded at Rs78.62 and Rs78.72. On the fifth day of the week in review, the rupee continued its falling trend versus euro. It further lost six paisa and traded at Rs78.68 and Rs78.78 on January 19. Compared to previous week, the rupee fell by ten paisa versus the European single common currency this week.
On the international front, US financial market was closed on January 16 for national holiday to honour Martin Luther King.
Sterling extended its gains after the Bank of England surprised the markets with a rate rise last week, climbing to an eight-year high of 236.00 yen before falling back to 235.72 yen. Swap contracts on yen overnight rates showed a roughly 75 percent chance of a move this week, up from around 65 per cent late last week.
In London, the euro moved off last week's 1-1/2 month lows against the dollar, as a dollar rally on stronger than expected US data gave way to consolidation and volumes thinned by a US public holiday.
On January 16, the Japanese yen fell to a 13-month low against the dollar after media reports suggested the Bank of Japan may not raise interest rates at its policy meeting this week. The dollar continued to move broadly higher, with softer crude prices seen helping a highly oil-reliant US economy.
The dollar climbed as high as 120.77 yen, its highest since December 2005. It last traded at 120.69 yen, up 0.20 percent on the day. The euro traded little changed at 155.87 yen.
On January 17, the dollar retreated against European currencies after a solid batch of US economic data did little to alter expectations the Federal Reserve would keep interest rates steady for some time. The New York session began with the dollar gaining modestly on December data showing a stronger-than-expected gain in core producer prices, weakening the case for a near-term cut in US rates. However, the index rose at a slower pace than in November.
Against the yen, the dollar was nearly flat at 120.62 yen ahead of the Bank of Japan's monetary policy decision. The yen has been under pressure recently as expectations for a rise in interest rates from the BoJ faded following media reports the bank was unlikely to act this week. Earlier this week, investors had braced for a BoJ rate rise to 0.5 percent despite some signs of political pressure on the bank to leave rates unchanged.
Sterling rose to a 2-1/2 year peak against the euro, with investors taking slightly weaker than expected jobs data in their stride and concentrating more on prospects for higher interest rates. The pound rose half a percent on the day against the dollar to a two-week high of $1.9714. The euro had fallen to 65.69 pence, having hit a low of 65.64, last seen in June 2004. Sterling hit an 8-year high against the low yielding yen and a 5-year peak against the Swiss franc.
On January 18, the dollar rose to nearly a four-year peak against the yen , buoyed by a raft of generally strong US economic data and a decision by the Bank of Japan to keep interest rates steady. The dollar, however, turned lower against the euro and sterling in late trading on some technical selling, despite positive US numbers, according to Reuters daily foreign exchange market reports. The yen had earlier come under intense pressure after the BOJ kept rates on hold at 0.25 percent, the lowest in the industrialised world. That helped push the dollar to 121.60 yen, the highest since March 2003.
The dollar came off highs to trade at 121.20, still up 0.5 percent on the day. The euro initially fell on the robust US data, but recovered late in the day to $1.2958, up 0.2 percent from late on a day earlier. Sterling, meanwhile, was up 0.2 percent at $1.9737. Buying interest in the single currency versus the yen helped the gains in the euro against the dollar. The euro rose to a roughly two-week high against the yen at 157.39, before trading back down to 157.18 yen, still up 0.8 percent on the day. Sterling rose to one-month highs of $1.9779 but erased gains in the face of stronger than expected US consumer prices data later in the session.
At the close of the week on January 19, the yen was mired near a four-year low against the dollar, a day after the Bank of Japan's decision to stand pat on interest rates sparked a broad sell-off in the low-yielding Japanese currency. The BOJ's vote to hold rates at 0.25 percent marked an abrupt shift in expectations and suggested that the central bank's path towards normalising interest rates from zero will take even longer as the economy's expansion has turned patchy.