The local currency market witnessed mixed sentiments this week. The rupee traded in narrow ranges versus the dollar. However, the rupee continued its sharp advances versus the European single currency, which crossed Rs85 barrier this week.

The euro is now heading for another new peak in coming weeks. Against the US currency, the rupee opened the week on a positive note. A stable trend was seen in the inter bank market, where the rupee gained one paisa against dollar on September 24. At close the dollar traded at Rs60.60 and Rs60.61 against last week close of Rs60.61 and Rs60.62 on improved dollar supplies.

The rupee managed to hold its overnight levels against dollar on September 25. The dollar traded at Rs60.60 and Rs60.61, as easy supply of dollar enabled the rupee to maintain its levels versus the US currency on the second day of the week in review. Bearish sentiment was seen in the inter bank market on September 26, as the rupee failed to show rise in its value despite the higher trend in the remittances and shed against dollar five paisa for buying and six paisa for selling to trade at Rs60.65 and Rs60.67 during the day.

Importers demand for dollars exerted downward pressure on the rupee, which shed 10 paisa against the dollar and traded at Rs60.75 and Rs60.77 on September 27. Importers’ rush for dollars discouraged the rupee to continue its upward journey.
On September 28, the rupee managed to recover its lost ground as it reversed its overnight weakness against dollar gaining six paisa in a single rally to trade at

Rs60.69 and Rs60.71. In the past one week, the rupee in the inter bank market lost eight paisa against the dollar.
In the open market, the rupee picked up two paisa against the dollar, changing hands at Rs60.63 and Rs60.65 on September 24, against previous weekend’s Rs60.65 and Rs60.70. On the second trading day, the rupee did not show any change against the dollar on buying counter but shed three paisa on selling counter as it traded at Rs60.63 and Rs60.68 on September 25. On September 26, the rupee maintained its overnight level against the dollar which traded unchanged at Rs 60.63 and Rs 60.68 on the third consecutive day.

After remaining unchanged for almost three days, the rupee lost ground versus the dollar on September 27, when it shed four paisa for buying and two paisa for selling and traded at Rs60.67 and Rs60.70. The rupee extended its overnight weakness against the dollar on the fifth trading day, changing hands at Rs60.70 and Rs60.75 on September 28. This week, the rupee in the open market shed five paisa versus the American currency, amid slow trading. Due to heavy inflows of overseas remittances, demand for American currency was low in the local currency market.

Versus the European single common currency, the rupee continued its fall against euro. It shed six paisa on buying counter and five paisa on selling counter, changing hands at Rs85.10 and at Rs85.20 on the opening day of the week after closing last week at Rs85.04 and Rs85.15. On September 25, the rupee, however, managed to recover against euro as it picked up 14 paisa and traded at Rs84.96 and Rs85.06. On September 26, the rupee once again reversed its trend versus the euro and dropped by 49 paisa against euro touching record lows during the week at Rs85.45 and Rs85.55.

The rupee, however, managed to recover from its overnight weakness on September 27, when it gained five paisa against euro to trade at Rs85.40 and Rs85.50. Finally on September 28, the rupee again lost its overnight firmness and shed 20 paisa against euro, changing hands at Rs85.60 and Rs85.70. During the week in review, the rupee crossed record lows of Rs85, after shedding 56 paisa against the European single common currency.

On the international front, the dollar hit a record low against the euro for the third straight session on the opening day of the week in review amid fears that a deepening housing slump could rein in economic growth and trigger more cuts in US interest rates. Trade was light as attention shifted to existing-home sales and consumer confidence data. Investors were worried that weak economic reports will push the Federal Reserve to follow last week’s half-per centage-point rate cut with more policy easing, further eroding the dollar’s yield advantage over other currencies, particularly the euro.

The euro was at $1.4088 after earlier hitting a record high $1.4130 on September 24, according to Reuters data. The dollar traded at to 114.75, down 0.6 per cent, below its level last weekend as investors remained wary of piling back into carry trades. Sterling recovered from a one-year trough against a basket of currencies, as investors started the week feeling a bit more optimistic about the health of the UK economy and financial sector. It was up 0.15 per cent at $2.0224.

On September 25, the dollar fell to a record low against the euro as US consumer confidence plunged to a near two-year trough, raising expectations of another Federal Reserve interest rate cut next month. The day marked the fourth consecutive session in which the dollar tested all-time lows against the euro, which has gained on signs of weaker US growth and the view that lower interest rates will keep eroding the dollar’s yield advantage.

The euro last traded at $1.4142, up 0.4 per cent and just below an all-time high of $1.4153 hit earlier, according to Reuters data. Earlier, the euro was unfazed by a report showing German Ifo business confidence survey surprised on the weaker side. The dollar also fell against the yen, trading at 114.69 yen, down 0.1 per cent on the day. The greenback rose against sterling, though, after a report in a British newspaper sparked worries about the UK financial sector arising from the credit crisis. Sterling traded at $2.0188.

On September 26, the US dollar recovered from record lows against the euro and pulled back from near a 15-year trough versus a basket of major currencies on as buyers took advantage of cheap exchange rates. The euro last traded at $1.4124, down 0.2 per cent on the day, after racing to a lifetime high of $1.4162 in European trade. The dollar rebounded when it dropped to near 1992’s all-time low against a basket of six major currencies.

The dollar’s recovery was also aided by firmer US stocks and rising US Treasury debt yields. Against the yen, the dollar rose 0.7 per cent to 115.55, boosted in late trade as stocks rallied on news that Bear Stearns is in talks to sell a minority stake. The euro has appreciated nearly four \per cent against the dollar so far in September, while emerging market currencies have also posted hefty gains. The baht has risen more than 5 per cent against the dollar so far this year after gaining 14 per cent in 2006. Sterling was slightly down against the dollar at $2.0164.

On September 27, the dollar hit a record low against the euro and slumped to an all-time low against a basket of currencies as tame inflation data bolstered the case for more interest rate cuts to shore up the US economy. A muted rise in a monthly measure of US core consumer prices, which exclude food and energy items, helped lift the euro above $1.42, its seventh record high in as many trading sessions. It later sailed through options-related barriers around $1.4250 to a record peak of $1.4278, up 0.8 per cent on the day.

The euro has gained 4.3 per cent versus the dollar so far this month and 4.9 per cent during the third quarter, the largest increase since the second quarter of 2006. The dollar fell 0.7 per cent to 114.75 yen and dropped nearly 1 per cent against the Canadian dollar to C$0.9920, leaving parity further behind. Sterling also rose 0.9 per cent to $2.0460. Sterling strengthened drawing support from the dollar’s broad weakness and data showing stronger than expected UK house prices. That helped the pound overall, rebounding as well from a 14-month low against a basket of currencies hit on September 26.
 
At the close of the week on September 28, the dollar stayed under pressure near record lows against the euro and a basket of currencies as investors awaited reports on US consumers due later in the day for further clues about the strength of the economy. The greenback had fallen to record lows the previous session, hit by fresh evidence that a weak housing market could crimp US growth and force the Federal Reserve to cut interest rates again.