Mixed sentiments were witnessed in the local currency market this week with the rupee/dollar parity showing a fluctuating trend. The parity moved both ways in a narrow range.
In the inter-bank market, supportive buying of dollars on the week's opening day forced the rupee to surrender its firmness, losing four paisas.
The US currency traded at Rs57.32 and Rs57.35 on February 23, as the rupee lost strength on expanding demand for dollars by local and foreign banks. On February 24, the rupee, however, managed to recover three paisas, changing hands at Rs57.30 and Rs57.32 against the dollar.
Maintaining its firmness over the dollar on February 25, the rupee posted fresh gain of one paisa versus the dollar trading at Rs57.29 and Rs57.31 on balanced demand and supply of dollars. The parity remained unchanged in the inter bank market for the second day in a row at Rs57.29 and Rs57.31 on February 26. Usual demand for dollars helped the rupee to maintain it present levels.
The corporate demand kept the rupee under pressure in the inter bank market on February 27, which shed five paisas versus the dollar, and traded at Rs57.34 and Rs57.36. The greenback demand was high as banks bought dollars to meet their immediate needs ahead of Ashura holidays.
On cumulative basis the rupee in the week managed to restrict decline against the dollar to 5 paisas over the previous week end in the inter bank market. In the kerb market, the rupee maintained its week-long firmness in terms of dollar at Rs57.30 and Rs57.35 on the week's opening day.
However, the gap between the interbank and kerb rates widened on February 24, as the rupee shed ten paisas against the dollar closing the trading session for buying at Rs57.40 and lost 15 paisas for selling to trade at Rs57.40 and Rs57.50 in the open market. The dollar was in demand as several investors covered their short-term positions. The accelerating dollar buying in the interbank market was also a boosting factor in recent gains of the greenback.
On February 25, the rupee depicted mixed trend versus dollar in kerb market and traded at Rs57.42 and Rs57.48, with the rupee shedding 2 paisas for buying and gaining 2 paisas for selling. Smooth supply of dollars and low buying interest boosted the rupee in the absence of big demand.
The rupee picked up another 2 paisas versus the dollar and settled at Rs57.40 and Rs57.50, on February 26. The rupee lost 3 paisas for buying at Rs57.43, but maintained its selling rate unchanged at Rs57.50 on February 27. Amid fluctuations the rupee in the kerb lost 2 paisas against the dollar over the previous week end.
The European single currency remained in demand exerting pressure on the rupee during the most of the week. The rupee commenced the week on a negative note and shed 15 paisas and traded at Rs71.83 and Rs72.13, on February 23. However on February 24, the rupee, failing to maintain its firmness over the euro, lost 25 paisas, changing hands at Rs72.08 and Rs72.38 on slight increase in the single currency's value in the international markets
On February 25, the single European currency was gradually heading to recover its lost ground. It picked up 60 paisas to trade at Rs72.67 and Rs72.97. The rupee gained Rs1.30 on February 26, for buying and selling at Rs71.37 and Rs71.67 as the euro fell in the world market versus the dollar.
However, it lost 6 paisas versus the euro for buying but gained 21 paisas for selling to trade at Rs71.43 and Rs71.46 on declining demand for euro in the international markets on February 27. However, the rupee this week gained 124 paisas versus the euro over the previous week close.
According to the Reuters daily report on the international financial markets, the dollar fell against other major currencies on the opening day as traders took profits on the US currency's steep, broad-based recovery from the end of last week.
In New York, on February 23, the euro traded at $1.2566 up 0.3 per cent on the day against the dollar after touching its lowest point in nearly three weeks earlier in the session at around $1.2450. The euro had slipped by around 2 cents on last weekend after touching a record high of $1.2927 earlier in the week.
The dollar fell 0.7 per cent on the day to 108.26 yen having earlier in Asia touched 109.40 yen, its highest since December 2. The dollar hit a three-year low around 105.15 yen earlier this month. Sterling was up 0.4 per cent at $1.8673 against the dollar.
Sterling gained against the dollar after recovering from two-week lows hit during the Asian session, following last week's broad-based recovery in the greenback lost steam.
It traded 0.40 per cent higher on the day at $1.8671 in London, up two cents from the day's low $1.8462. The dollar's resurgence last week and early this week had hit sterling, but the pressure on the pound lifted when the greenback rally fizzled.
On February 24, the dollar slumped against other major currencies, undermined by a surprisingly weak reading on the US consumer sentiment that raised fresh concerns over the outlook for the world's biggest economy.
The euro rose to a two-day high of $1.2713 before slipping to $1.2683, still up more than one per cent against the dollar. It touched a three-week low around $1.2450 early on February 23, rising more than one per cent against the dollar to $1.8903. The greenback fell more than one per cent against the Swiss franc to 1.2413 francs and against the Australian dollar to the US $0.7807.
Against the yen, the dollar fell 0.2 per cent to 108.17 yen. It hit a three-month high around 109.40 yen on February 23, up 4 per cent from 3-1/2-year troughs set two weeks earlier, before pulling back on profit-taking. The pound, which rose to an 11-year high against the dollar and a one-year peak on the euro last week, has succumbed to profit-taking pressure in recent sessions as the oversold greenback has recovered against the euro and other currencies.
The dollar rose 1.5 per cent against the euro on February 25, as investors considered the possibility that the European Central Bank could cut euro zone interest rates while the Federal Reserve may lift the US rates sooner than expected. The US currency was bolstered by a report that the ECB and the Bank of Japan would be very worried if the euro/dollar rate topped $1.35, which could lead to intervention.
In late New York trade, the euro was down on the day against the dollar at $1.2498, after touching a session low of $1.2491. It marked a reversal from the euro's rally on February 24, when it gained a cent on weaker-than-expected US consumer confidence data.
The dollar traded at 109.04 yen, a gain of 0.8 per cent on the day, according to Reuters data. It was trading just below opening week's three-month high of 109.40 yen. Against the Swiss franc, the dollar climbed 1.48 per cent.
It gained 1.19 per cent against the Australian dollar and 11 per cent against the pound. Sterling vaulted to a one-year high against the euro and a five-year peak against the yen on February 25 as an upward revision to Britain's economic growth record bolstered the case for higher UK interest rates, trading just short of session highs against the euro at 66.80 pence, having earlier risen to 66.70, its highest level since February 2003.
It kept a firm footing against a broadly-rebounding dollar at $1.8900. Last week, sterling rose to $1.9140, its highest since Britain's ejection from Europe's Exchange Rate Mechanism in September 1992.