The inter bank market commenced the week on a negative note as the rupee/dollar parity continued its downtrend on short dollar supplies. As a result the rupee shed two paisa against the dollar on July 9 and traded at Rs60.38 and Rs60.40 after closing last week at Rs60.36 and Rs60.38. On July 10, the rupee almost held its overnight level and traded at Rs60.39 and Rs60.40 on improved dollar supplies.
The rupee remained unchanged for the second consecutive day on July 11, changing hands at its overnight levels of Rs60.39 and Rs60.40. On July 12, the rupee/dollar parity inched up slightly as the rupee gained one paisa in terms of dollar and traded at Rs60.38 and Rs60.39. On July 13, the rupee further gained one paisa against the dollar and traded at Rs60.37 and Rs60.38. During the week in review, the rupee in the inter bank market managed to display firmness versus the dollar. It recovered two paisa on cumulative basis.
Higher demand for dollars by the interbank market on the opening day of the week exerted downward pressure on the rupee in the open market, where the rupee extended its weekend slide against the dollar on July 9, losing five paisa against the dollar for buying and another six paisa for selling to trade at Rs61.10 and Rs61.18. The rupee had closed last week at Rs61.05 and Rs61.12.
However, the rupee managed to recover from its overnight weakness on July 10 on improved supply of dollars. It gained 10 paisa against the dollar in the open market for buying and eight paisa for selling to trade at Rs61.00 and Rs61.10. Upward trend in rupee/dollar parity persisted in the open market on July 11 as the rupee gained 10 paisa more against dollar and traded at Rs60.90 and Rs61.00.
On July 12, the rupee failed to maintain its firmness against the dollar and lost five paisa, changing hands versus dollar at Rs60.95 and Rs61.05. On July 13, the rupee shed five paisa against dollar for buying and three paisa for selling, changing hands at Rs61.00 and at Rs61.08. During the week, the rupee in the open market lost five paisa versus the dollar.
Versus the European single common currency, the rupee stood firm at its weekend's level of Rs82.60 and Rs82.70 on the opening day of the week in review. The rupee, however, managed to recover its overnight losses on the second trading day, when it was seen changing hands versus the euro at Rs82.45 Rs82.55. But this firmness over the euro proved short lived, as the rupee on the third trading day registered sharp losses of 51 paisa and breached psychological barrier of Rs83 to trade at Rs83.06 and Rs83.16
Downtrend in the rupee/euro parity continued. The rupee further shed 14 paisa more in relation to the euro on the fourth trading day and traded at Rs83.20 and Rs83.30. It further lost 25 paisa on the fifth day of the week in review, when the euro was seen changing hands at Rs83.45 and Rs83.55 as the single currency lifted with sharp gains against the leading currencies in the world market. The rupee this week lost 85 paisa versus the European single common currency.
On the international front, the dollar was mostly flat on the opening day of the week in a quiet session, but expectations the Federal Reserve will keep interest rates unchanged this year even as other central banks tighten monetary policy kept sentiment negative. Analysts said weekend robust US jobs report was not enough to reverse the recent trend of narrowing interest rate advantage for the dollar over major European currencies, which has eroded demand for the greenback.
High oil prices and steady growth are expected to keep the European Central Bank on a tightening path, although the Bank of Japan will likely lag all other Group of Seven central banks bar the Fed, even if it does hike rates from 0.5 percent some time this year. The dollar remains biased to the downside as a result of the outlook that US interest rates will remain steady for the remainder of this year.
On July 12, the dollar dropped to a record low against the euro for the third day in a row as the US subprime mortgage market crisis spooked currency investors. The greenback's decline was broad as well as deep. It tumbled to a 2-1/2-year low against a basket of six major currencies, largely on concerns that growing problems in the credit market could prompt foreign investors to steer clear of dollar-denominated paper.
At the close of the week on July 13, the yen hit a record low versus the euro and suffered broadly as the continuing view that Japanese rates will rise slowly prompted investors to sell the low-yielding yen for assets in currencies offering higher yields. The dollar hovered near an all-time low against the euro and a 26-year trough versus sterling as traders remained cool on the currency due to worries about the US subprime mortgage sector.
The dollar traded at 122.45 yen, barely changed on the day and pulling away from the day's high of 122.62 yen touched earlier on demand from Japanese importers before the weekend. The euro was little changed from late New York trade at $1.3780, hovering within reach of a record high $1.3799 hit in the previous session.