The rupee shed two paisa against dollar and traded at Rs60.41 and Rs60.42 on August 6, against previous week close of 60.39 and 60.40. However, it maintained its overnight firmness versus the dollar, trading unchanged at Rs60.41 and Rs60.42 on August 7.
On August 8, the rupee continued unchanged against dollar for the third consecutive day, changing hands at Rs60.40 and Rs60.42. Rising demand by the importers on August 9, however, exerted pressure on the rupee on the fourth day of the week in review. As a result, a declining trend in the rupee/dollar parity was witnessed in the inter bank market, where leading domestic and foreign banks were the aggressive dollar buyers to cover importers demand. The rupee shed three paisa on the buying counter and two paisa on the selling counter to trade at Rs60.43 and Rs60.44.
On August 10, the inter bank market did not witnessed any major change in the rupee/dollar parity, amid quiet trading. The rupee traded at Rs60.43 and Rs60.45 against the dollar. It shed only one paisa on the selling counter, while remaining unchanged on the buying counter. At this level, however, the rupee in the inter bank market lost four paisa on the buying counter and five paisa on the selling counter against the dollar during the entire week in review.
In the open market, the rupee opened the week on a positive note on August 6, gaining five paisa against the dollar to trade at Rs60.83 and Rs60.93 after closing at Rs.60.88 and Rs.60.98 last week. On August 7, the rupee extended its overnight firmness over the dollar and gained three paisa more, trading at Rs60.85 and Rs60.90. Improved dollar inflows helped the rupee to sustain its gains in relation to the greenback on August 8. As a result, the rupee further extended its firmness as it picked up five paisa to trade at Rs.60.80 and Rs.60.85 versus the dollar.
On August 9, the rupee maintained its overnight levels trading unchanged at Rs60.80 and Rs60.85 against the US currency. On August 10, the rupee traded unchanged for buying at Rs60.80 but it lost five paisa to trade at Rs60.90 on selling counter. This week in the open market, the rupee managed to recover eight paisa against the dollar on cumulative basis.
Versus the European single common currency, the rupee displayed strength on the opening day of the week in review as it rose by 10 paisa against the euro on August 6, changing hands at Rs83.65 and Rs83.75 against previous week close of Rs83.55 and Rs83.65. The rupee slightly improved its overnight levels against euro, picking up one paisa to trade at Rs83.56 and Rs83.66 on August 7. The rupee upward trend versus the euro continued on the third trading day as it managed to gain 36 paisa and traded at Rs83.20 and Rs83.30 on August 8.
However, on the fourth day of trading, the rupee failed to maintain its firmness versus the euro. It lost 30 paisa and traded at Rs83.50 and Rs83.60 on August 9. Against the euro, the rupee displayed strength on August 10, following its sharp fall against world leading currencies. In the local currency market, the rupee rose sharply by Re.1 versus the euro, changing hands at Rs82.50 and Rs82.60.
In the entire week, the rupee managed to recover 105 paisa against the single common currency.
Dollar: In the international financial markets, the dollar rallied against the yen on the week's opening day, as investors pared extremely bearish bets on the greenback amid a strong recovery in the US stock market and a rise in benchmark Treasury yields. However, the dollar was down slightly against the euro and fell to a 15-year low against a basket of major currencies as traders speculated that woes in the US credit market will prompt the Federal Reserve to cut interest rates.
Analysts said the positive correlation between movements in the stock market and gains in the dollar against the yen over the past year have been fairly consistent. Equities and carry trades currency pairs such as euro/yen and dollar/yen have risen and fallen together in recent sessions due to the perception of the relatively high risk that each investment holds. In late trading on August 6, the dollar climbed 0.8 percent against the yen from last week close of 118.93, while the euro rose 0.9 percent to 163.99 yen.
Against the dollar, the euro was up 0.1 percent at $1.3788, just over half a cent below a record high touched last month. Interest rate spreads have also moved in favour of the dollar against the euro. Spreads in earlier months had moved against the greenback and broke below well-defined ranges, weighing on the dollar across the board. Sterling, meanwhile, fell about 0.4 percent on the day to $2.0307. Traders said a technical break in the euro/sterling cross helped weigh on the pound.
On August 7, the dollar rose against the euro maintaining gains after the Federal Reserve held US interest rates steady, as expected, and said inflation remained its primary concern. The Fed acknowledged that financial markets have been volatile in recent weeks and credit conditions have become tighter, but the US central bank said the economy was likely to expand at a moderate pace in the coming quarters. Investors viewed the Fed's statement as an indication that it will hold off cutting interest rates, effectively preserving the greenback's yield advantage over other major currencies.
In New York, the euro was down 0.3 percent against the dollar at $1.3746. Against the yen, the dollar was slightly down at 118.66 yen. The yen had briefly rallied against major currencies on the Fed's inflation remarks, tracking initial falls in the US stock market, but came off highs as equities rebounded.
Against the Swiss franc, the dollar rose 0.4 per cent to 1.1962 francs. Sterling, meanwhile, fell 0.4 per cent to $2.0230. The pound was down half a percent at $2.0196 in London.
On August 8, the yen fell broadly after a Federal Reserve statement tempered fears about the impact of US credit troubles on the wider economy, boosting stocks and other risky assets. Signs of a recovery in investor appetite for risk, underscored by rising stocks, weighed on the low-yielding yen, a favourite vehicle for carry trades. The dollar declined against other major currencies after Fed gave no indication of any near-term interest rate action, contrasting with the European Central Bank and the Bank of England, which has signalled rate rises this year.
In late New York trading, the dollar was up 0.9 per cent against the yen at 119.74 yen, more than two yen up from this week’s four-month low. The euro was up 1.1 percent against the Japanese currency at 165.16 yen. The euro rose 0.4 percent against the dollar to $1.3792, less than half a cent below a record high hit in July. Analysts said the dollar will likely continue to lose its interest rate advantage in coming months, with the ECB having already signalled a rate increase in September.
Sterling was up 0.7 per cent at $2.0358 against the dollar after a quarterly report from the Bank of England suggested UK interest rates may have to rise more to combat inflation. The Australian dollar also rose, up 0.8 per cent against the US dollar at $0.8613 after the Reserve Bank of Australia raised rates a quarter point to 6.5 percent. The pound was up 0.8 per cent at $2.0392 down from $2.0240 just before the report was released in London.
On August 9, the yen rose sharply as investors ran from risky low-interest rate funded trades following further reports that US subprime mortgage crisis is spreading in Europe. In New York, Euro fell as much as 2 percent against the yen and one per cent against the dollar after France's largest listed bank temporarily suspended redemptions at three funds worth $2.2 billion, sending overnight US and euro zone borrowing rates soaring.
In late trading, the dollar was down 1.21 per cent against the Japanese currency at 118.18 yen, while the European single common currency slid2.08 percent to 161.64 yen, the biggest daily rise in two years. The high yielding Australian and New Zealand dollars dropped by more than 2 percent against the yen. Meanwhile the euro slipped 0.88 percent to $1.3673, well below July's record high near $1.3850. The pound fell against the yen and dollar in step with other high-yielding currencies after renewed credit concerns dampened risk appetite and prompted broad unwinding of carry trades. It fell 0.5 per cent to $2.0269.
At the close of the week on August 10, the dollar slipped 0.1 percent from late US trade to 118.06 yen, sliding back towards a fourth month low of 117.19 yen hit earlier this week. Traders said that buying by Japanese importers helped support the dollar in Tokyo. The euro fell 0.2 per cent to 161.30 yen. However, the single currency was steady against the dollar at $1.3663. Sterling was down 0.2 percent at $2.0189.