The leading factor behind the rupee’s fall was the costlier payments as a result of record breaking oil price in the world markets. In the international markets, the oil prices are near to $144 per barrel. In the local currency market, the rupee has so far lost over 12 per cent against the dollar and by more than 32 per cent against euro. The outlook continues weak because of growing concern about widening fiscal and current account deficits and inflation at a 30-year high as well as political uncertainty.
The inter-bank rupee/dollar parity continued its downtrend on the last day of FY 2008, and commenced the first week of FY 2009 on a negative note with the rupee shedding 20 paisa against the dollar on June 30, due to persistent high demand for dollars amid rising prices of crude oil in the international market, which has made imports costlier. The dollar traded at Rs68.40 and Rs68.45 as against previous week close of Rs68.20 and Rs68.25. The inter bank trading remained suspended on July 1 being Bank Holiday.
When trading resumed on July 2, the rupee crossed Rs69 barrier after posting sharp losses against the dollar. It shed 58 paisa in single day trading, changing hands Rs68.98 and Rs69.02 due to hectic dollar buying on the second trading day of the week in review. Mounting demand for US currency to cover import payments kept the rupee under downward pressure on July 3, when the rupee lost 77 paisa on the buying counter and another 83 paisa on the selling counter to trade at Rs 69.75 and Rs69.85 against the dollar.
Later in the day, the rupee rebounded slightly recovering 35 paisa closing the day at Rs69.50 and Rs69.60 against the dollar. At this level, the rupee was lower by 52 paisa on the buying counter and another 58 paisa on the selling counter against the previous day close of Rs 68.98 and Rs69.02. On July 4, the rupee dropped further against the American currency, losing 60 paisa to trade at Rs69.58 and Rs69.62. This week the rupee in the inter bank market was costlier by 138 paisa against the dollar.
In the open market, the rupee lost 10 paisa in relation to dollar and traded at Rs68.55 and Rs68.70 on the opening day of the week. The rupee further shed 10 paisa on the buying counter and another 5 paisa on the selling counter, changing hands versus the dollar at Rs68.65 and Rs68.75 on the second day of the week in review against previous week close of Rs68.55 and Rs68.70. Due to the closure of inter bank market on account of Bank Holiday, the rupee in the open market was under significant pressure on July 1.
The rupee continued its fall against the dollar on July 2, posting fresh losses of 15 paisa on the buying counter and 25 paisa more on the selling counter, trading at Rs 68.80 and Rs69.00 against the American currency. On July 3, the rupee suffered the sharpest single decline of 80 paisa against the dollar, changing hands at Rs69.60 and Rs69.80. On July 4, the rupee extended its weakness against dollar, shedding 15 paisa for buying and 20 paisa for selling, changing hands at Rs69.75 and Rs70.00 versus the dollar. During the week in review, the rupee in the open market lost 120 paisa on the buying counter and 130 paisa on the selling counter against the dollar.
Versus the European single common currency, the rupee shed 30 paisa for buying and 10 paisa for selling to trade at Rs107 and Rs107.10 on the first trading day of the week in review after closing previous week at Rs106.70 and Rs107.00. It further shed five paisa for buying and 15 paisa for selling to trade at Rs107.05 and Rs107.25 on the second trading day of the week. The rupee/euro downtrend persisted on the third trading day when euro traded at Rs107.65 and Rs107.80 after posting fresh losses of 60 paisa on the buying counter and 55 paisa on the selling counter.
On the fourth trading day, the rupee slipped to Rs108.50 and Rs108.70 against the European common currency after shedding up to 90 paisa over its overnight levels. The rupee, however, gained 50 paisa in relation to euro for buying and 60 paisa for selling on the fifth trading day to close the week at Rs108.00 and Rs 108.10, bringing cumulative losses versus the European single common currency to 130 paisa on the buying counter and 110 paisa on the selling counter during the entire week in review.
In the international financial markets, the dollar gained against the euro on June 30, as traders bought back the US currency as the second quarter ends, though losses in the euro were limited ahead of an expected rate hike by the ECB this week. In New York, the euro was 0.3 per cent lower at $1.5744 after earlier hitting a three-week high of $1.583. Analysts said a break of technical resistance around $1.5850 could open the door for a move above April’s record highs above $1.60.
The greenback also rebounded from earlier lows against the Japanese yen. It last traded little changed against the yen at 106.13 yen. The euro was last down 0.2 per cent against the dollar in the quarter at current prices, after rising about eight per cent in the first quarter. Sterling was little changed against the dollar after earlier hitting a fresh two-month peak in a choppy session dominated by position adjustments at the quarter-end. It was little changed at $1.9951, having earlier risen to $1.9966 - a level last seen in late April - and then fallen as low as $1.9892.
On July 1, the euro changed hands 0.2 per cent higher against the dollar at $1.5783. Yen gains against the dollar were limited as demand for the greenback rose after the ISM report. The dollar last traded near flat at 106.10 yen, but well off the session low of 105.24 yen, while the euro gained 0.2 per cent to 167.47 yen. Sterling retreated from a two-month peak above $2 set earlier as a surprisingly strong US manufacturing survey contrasted with news of contraction in that sector in Britain. It was steady on the day at $1.9936, having retreated from an earlier two-month peak of $2.0006.
On July 2, the euro was 0.6 per cent higher at $1.5877, having earlier topped at $1.5888 - a level last seen in late April, according to Reuters data. It was 0.5 per cent firmer against the Japanese currency at 168.34 yen. The greenback edged lower against the yen to 105.97. The pound fell as low as $1.9846 and was last down 0.1 percent at $1.9928. The pound was down 0.1 percent at $1.9935, having hit a 2-month high above the key $2 mark. It trimmed earlier losses after a report showed the US private sector shed more jobs than expected in June.
On July 3, the dollar hit a two-month low against the euro after a report the previous day showed US private employers cut the most jobs in nearly six years and the Dow sank into bear market territory. The euro rose as high as $1.5893 on trading platform EBS, the highest since late April and edging closer to an all-time peak of $1.6020 that was also hit in April. It later trimmed its gains to stand at $1.5865 down about 0.1 percent from late US trading on July 2. The dollar stood at 106.15 yen up around 0.3 percent from late New York. The pound was down 0.5 per cent at $1.9836.
At the close of the week on July 4, the dollar steadied in Tokyo market, keeping most of the sharp gains made against the euro the previous day after payrolls data came in close to expectations and eased some fears about the health of the US job market and economy. The euro trimmed losses against the dollar as some investors bought the single European currency back to book profits in quiet trade with US markets closed for the Independence Day holiday.
The euro edged up 0.1 percent to $1.5717 after dropping to a one-week low of $1.5673. It had fallen on July 3 from a high above $1.5900 and posted its biggest one-day drop since late April. The dollar was little changed at 106.73 yen. The Swiss franc was 0.2 percent higher against the dollar, trading at 1.0242 per dollar. Sterling was little changed against the dollar at around $1.9825, having earlier touched a fresh one-week low of $1.9796. Over the course of the day, the pound traded at a tight range between $1.9796 and $1.9848.