Downtrend in the local currency market persisted this week, with the rupee falling versus dollar and euro. It lost sizably as dollar demand by banks to meet corporate clients requirements ahead of the end of first quarter remained high.
In the inter-bank market, the dollar managed to recover modestly versus the rupee, amid higher demand by banks, on the week's opening day (September 6). In the early trading session, the rupee in the inter-bank market first shed four paisa over the previous week close but later recovered three paisa due to heavy dollars selling to close at Rs58.83 and Rs58.84.
On September 7, the rupee-dollar parity rates fell further. Banks were buying dollar to cover Pak-Arab Refinery (Parco) payment of $100 million. The rise in demand pushed the rupee down by another four paisa against the dollar, which traded at Rs58.84 and Rs58.88.
Dollar selling, however, resisted any sharp decline in rupee value. On September 8, the rupee continued its decline versus the dollar. It lost two paisa changing hands at Rs58.87 and Rs58.89.
Increasing demand for dollars on September 9, forced the rupee to continue its down-trend. But increased dollar selling resisted any sharp fall in the parity. The rupee shed just one paisa more versus the dollar, which was quoted at Rs58.88 and Rs58.90.
On September 10, the parity did not show any change and remained intact on its overnight levels. The currency analysts are of the view that the State Bank is injecting dollars to keep the rupee-dollar parity at a resistance level of Rs59 in the inter-bank market.
More or less similar sentiments were witnessed in the open market, where the rupee managed to hold on to its weekend levels at Rs59.20 and Rs59.25 on the opening day of the week.
But on September 7, as a result of inter-bank market dollar-buying from the open market, the rupee suffered a sharp fall in the kerb, losing 13 paisa against dollar, which traded at Rs59.33 and Rs59.38.
Rising demand for dollars in the inter-bank market on September 8, pushed the rupee value sharply down by 12 paisa, with the dollar changing hands at Rs59.40 and Rs59.50.
Continued dollar buying resulted in further weakening of the rupee on September 9. In the early session, the rupee at first lost 15 paisa with the dollar trading at Rs59.55 and Rs59.65, but then dollar selling by exporters eased pressure on the rupee, which recovered five paisa to trade at Rs59.50 and Rs59.60 at close.
On September 10, buying pressure from the inter-bank market eased the rupee value slightly against dollar in the open market, which shed five paisa for buying and selling at Rs59.55 and Rs59.65.
At close the rupee further shed five paisa with the dollar changing hands at Rs59.60 and Rs59.70. In the week the rupee shed 47 paisa over the previous week close. Since the fiscal year 2004-05 started, the rupee has lost nearly Re 1 in the open market. The gap between the official and open market rates widened, showing 65 paisa difference, as dollars demand increased on higher payments.
Against the Euro, the rupee did not move sharply on September 6, as the European single common currency traded at Rs71.60 and Rs71.90. On September 7, the rupee shed 15 paisa against the euro changing hands at Rs71.75 and Rs71.95 as the dollar managed to hold firmness versus world leading currencies.
On September 8, the rupee fell by another 15 paisa versus euro changing hands at Rs71.90 and Rs72.20. Dollar was down versus major currencies in the international markets.
On September 9, on the back of dollar's weakness, the euro gained 70 paisa in relation to the local currency and traded at Rs72.60 and Rs72.90. On September 10, the euro breached an important mark of Rs73 versus the rupee in the open market after recovering solid ground in the overseas markets.
The single European currency is dominating the global financial markets these days as the dollar trimmed some gains on cloudy US economic outlook. So, the local currency also came under pressure, suffering 10 paisa loss versus euro for buying and selling at Rs72.70 and Rs73. The rupee has lost Rs1.25 against the euro this week.
In the international financial market, the dollar slipped against the yen in thin trade on September 6, but its losses were limited as investors watered on an address by the Federal Reserve chief.
The yen gained some support from upbeat corporate capital spending data for the April-June quarter, which helped lift the Nikkei stock average to a fresh five-week high. The dollar fetched around 109.85 yen, down 0.3 per cent on the day and off almost a yen from the 2-1/2 week high of 110.70 hit last week with many investors cautious ahead of Green span's address.
Trade was razor thin and the dollar's down ward move against the yen was largely driven by speculative players looking to take out stops at around 109.80. The euro bought $1.2073, barely changed in London.
Sterling was stronger, trading at around $1.7805 compared with 1.7805 in late London trade and a three-month low of 1.7735 struck last week. Sterling has shed around seven percent from an 11-1/2 year high of 1.9140 struck in February.
On September 7, the dollar retreated against major currencies as investors took profits on sharp US jobs data-related gains last week, turning cautious ahead of a speech by Federal Reserve Chairman Alan Green span. Market activity was quite sluggish, although sterling and the Canadian dollar drew the most attention on a day.
In New York, the euro was trading up against the dollar at $1.2103 of previous week's low around $1.2040. The dollar slipped 0.7 percent against the yen to 109.28 yen, off more than 1 yen from the 2-1/2 week high of 110.70 yen.
Against the Swiss franc, the dollar declined 0.3 percent to 1.2675 francs. Sterling lost ground, down 0.4 percent at $1.7730 after British manufacturing output showed a surprise fall in July, fuelling expectations that UK interest rates are at or very close to their peak.
On September 8, the dollar weakened against major currencies after Federal Reserve chairman Alan Green span painted a softer picture for the world's largest economy than many had anticipated, citing a rising budget deficit and low inflation. The recent US economic slowdown has fuelled worries among currency investors that the Fed may have to pause its dollar-boosting interest rate hikes.
In New York trade, the euro surged to session highs around $1.2181, before trading back down to $1.2169. Against the yen, the dollar sagged to session lows at 109.07 yen.
The dollar eased 0.45 percent against the Swiss franc to 1.2615 francs. Sterling rose to $1.7880. The pound edged up to 103.3 on its trade-weighted index, from seven-month lows of 103 hit on September 7.
On September 9, the dollar edged higher against major currencies after the US weekly jobless claims report suggested stable job creation, although Hurricane Charley likely skewed the data. Initial claims for state unemployment benefits fell 44,000 to 319,000 in the week ended September 4, compared with the previous week's revised 363,000 claims.
In New York trade, the euro fell to an intra-day low of $1.2160 before trading back up to $1.2171. Against the yen, the dollar rose to 109.83 yen. The yen had earlier slipped broadly after Japan's soft machinery orders data and a government downgrade in its view on exports and output raised concerns the recovery might be losing momentum.
The dollar traded higher against the Swiss franc at 1.2649 francs. Sterling, meanwhile, fell to $1.7822 reacting little to news that the Bank of England left interest rates unchanged, as expected.
The Australian dollar plunged nearly 1.4 percent against the US dollar to around US$0.6870, extending losses after a car bomb exploded outside the Australian Embassy in Jakarta.
At the close of the week on September 10, the dollar rose against the yen following a surprising downward revision to Japanese growth data, but it lost ground against other currencies on worries about the huge US trade deficit. The dollar jumped as high as 110.20 yen, up around 0.7 percent from its level before the gross domestic product (GDP) figures, were released.
The dollar hit a fresh three-week low against the euro after San Francisco Federal Reserve President Janet Yellen said that a turnaround in the US currency account deficit had to involve the dollar.