THE rupee commenced the week on a stable note. The inter-bank market witnessed lack of interest in dollar trade under uncertain conditions on October 29.
The smooth supply of dollar, expected large inflow of aid, improved foreign exchange reserves position and the cut in dollar demand extended upward pressure on the rupee on October 30 and 31.
Most leading investors remained on the sidelines and only a small number of investors visited the market to cover their short-term requirements. There was virtually no interest in fresh dollar-buying amid sluggish activity on November 1. The parity remained stable. Finally the week ended on a positive note with the rupee gaining 15 paisa on November 2. During the week the rupee showed an appreciation of 25 paisa. It mostly remained range bowed trading between Rs61.60/65 and Rs61.35/40 versus the dollar.
Against other major currencies, the rupee ruled higher at the inter-bank forex counter against the Canadian and Hong Kong dollars, Chinese yuan, Malaysian ringgit, Saudi and Qatari riyals and the UAE dirham. It, however failed to hold it firmness against most European currencies and lost ground versus the British pound, Swiss, French and Belgian francs, Australian, New Zealand and Singapore dollars, euro, German mark, Dutch “wilder, Danish and Norwegian loony, Sweden krono, Italian lira, Austrian schilling, Spanish peseta, Japanese yen and Kuwaiti diner.
In the kerb trading the rupee shed 15 paisa for buying and 5 paisa on selling on October 29, when the dollar traded at Rs61.75/85 against the weekend close of Rs61.60/80, amid dull business.
However, it recovered its lost ground on October 30 as smooth dollar supply released the pressure on demand and helped the rupee gain 30 paisa for buying and 35 paisa for selling to trade at Rs61.45/55 against the dollar. It remained stable at this level for three days, amid lacklustre activities.
The dollar buying rate in the inter-bank market was 5 paisa higher than in the open market, while the selling rate was in balance on November 1.
This is in sharp contrast with the past trend in the rupee/dollar parity in the two markets. Usually the dollar rate in the open market had been higher than the inter-bank rate by about Rs2-3.
The gap had almost vanished in recent weeks. At the close of the week on November 2, however, a 15 paisa appreciation in rupee value in the inter-bank market, the dollar buying and selling rate in the open market was higher by 10 to 15 paisa. Sharp fall in dollar demand in the local market since September 11 incident has released pressure on the rupee which has improved versus the dollar by 4 per cent in the inter-bank market and by 8.3 per cent in the open market. The present trend is likely to persist in both the markets in the absence of demand for dollar.
On the international front, the dollar suffered its steepest fan in six weeks against the euro in New York and hit two-week lows against the sterling on October 29, as dealers readied for evidence of further US economic weakness this week. It shed more than 1.25 per cent on the day against the euro, giving back the broad gains it had made last week.
The euro traded within sight of one-week peaks against the dollar around 90.50 cents, up more than 1.25 per cent from the previous US close. Against the yen the dollar hovered around 122 yen, down more than 0.50 per cent from its prior US closing levels and well below last week’s 2-1/2 months peaks above 123 yen.
In Tokyo the dollar inched down against the yen helped little by weak Japanese output data and the Bank of Japan’s bleak outlook on the economy and prices. The dollar hit a low of 122.33 yen in late morning after stop-loss orders were triggered mainly by US funds. the dollar was at 122.47/50 yen against last week’s late US level of 122.66. Dealers noted continued sell offers from US funds around and above 122.50 yen, with some players hoping to trigger stops around 122.30 yen. The dollar could hit 122.08 yen near-term, a level seen shortly after the September It attacks on the United States. The dollar had fallen to below 116 yen on September 21.
In London, the sterling leapt over one per cent to two-week highs against the dollar. It had risen to a high of $1.4530 by late European trade, staging its biggest one-day rally since the September 11 attacks. The pound tested three-week peaks around 62 pence per euro but slipped back as the euro’s rally above $0.90 gave the single currency additional momentum.
On October 30, the dollar narrowly reversed its fall to multi-week lows against the euro but sentiment remained weak after a gauge of the US consumer sentiment eroded to its lowest level since February 1994. The dollar settled just below 122 yen at the US close, rising from a one-week trough against the Japanese currency below 121.65 yen. In recent sessions, the dollar’s losses against the yen have been mitigated by Japan’s vocal reluctance to see its currency strengthen amid a deepening economic contractions.
In Tokyo, the dollar was on the defensive as economic worries, the ever-widening anthrax scare and even default dangers in Argentina provided convenient excuses to take profit on its Free week-long rally. With the market fully expecting a riptide of dire US data thus week, dealers saw little risk, and much profit, in shorting the dollar - though equally, they said, with the market in such a short term mood, the dollar could easily turn on a dime. For the moment, however, speculators see more scope on the downside and had the dollar pimped near two-week lows of $0.9060 following opening week’s slide from $0.X920. Likewise, the dollar was crouching at 1.6275 Swiss francs, having stumbled all the way from 1.6535.
In London, the sterling hit three-week highs against the dollar as investors sold the greenback after news that the US consumer confidence had fallen sharply last month. But the pound retreated about half a per cent from three-week highs against the euro as the single currency racked up speedier “aims versus the dollar. The sterling rose to three-week highs just shy of $1.46, up more than a third of a per cent on the day and about four cents above two-month lows set last week. The pound traded around 62.35 pence per euro, down about a third of a per cent on the day.
In New York the dollar was broadly firmer on October 31, as the dealers reacted to the news the US economy shrank at the sharpest rate since 1991 with relief it had not fared as badly as expected. In late US trading, the euro was around 90 cents, down 0.45 per cent from the previous US close and well off overnight peaks around 90.75 cents and two-week higher at 9l cents hit a day earlier. The dollar also soared to record highs against the Canadian unit, breaking past key technical levers to trade as high as C$1.5887, up more than 0.65 per cent on the day.
In Tokyo, the dollar stayed under pressure on wariness that the key US third-quarter growth figures due later in the day would provide further proof of weakness in the economy. Sentiment for the dollar deteriorated as the market shifted its focus to the weak US share prices and a bunch of bearish economic indicators released recently. But the dollar’s fall was relatively small since there is no convincing reason to buy other currencies such as the yen and the euro, as they too have problems.
The dollar stood at 121.80/90 yen against the previous day’s US close of 121.96/2.04. The end-month commercial demand lifted the dollar to an intraday high of 122.22 yen in the moving, but the greenback slowly drifted down. The euro moved little in Tokyo but edged higher from offshore lows. It may retest resistance above $0.91 in the near term. The euro stood at $0.9065/70 from $0.9044/48. Against the yen, the single currency stood at 110.42/52 versus 110.36. The dollar was also helped by the fact the United States has been too efficient at exporting its economic woes to the rest of the world.
The pound held near three-week highs as a contraction in the US growth data contrasted with the relatively healthier outlook of the UK economy. The pound stood at $1.4540, having risen to three weeks’ high of $1.46 in the previous session. Against the euro, it rose half a per cent to 62.04 pence.
In New York on November 1, the dollar rose from multi-week troughs against the key currencies as the markets shrugged off the data showing the manufacturing activity in October hit lows, unseen since the depths of the 1991 recession.
The single currency capitulated to selling that held it near 91.40 cents, up 0.40 per cent from its previous US close. It was above a 1-1/2 week low against Japan’s currency at 121.80 yen - a level still well below its overnight high at 122.50 and down 0.40 per cent on the day.
The dollar clung to most of its offshore gains in Tokyo after the better-than-expected US growth figures, but many dealers held back from trading as they braced for more data due out this week. It was in a well-worn range at 122.38/39 yen, having moved in a range of 122.20-122.53 yen. The US currency rallied to a high of 122.65 yen in offshore trade, boosted by the data showing that the GDP contracted at an annual rate of 0.4 per cent in the third quarter — better than a market consensus of a 1 per cent decline.
In London, the sterling rose one per cent to three-week highs against a broadly-battered dollar as unease ahead of this week’s US jobs data overshadowed economic news on the domestic front. The pound rose to highs around $1.4685, taking it within two per cent of 91/2 month peaks set in early October around $1.4840. Dealers said the sterling broke through the $1.46 barrier, triggered automatic orders to buy cable (sterling/dollar), helping to send the pound sharply higher.
At the close of the week on November 2, the dollar drifted down on the yen in Tokyo as the market braced itself for the dreadful US pay-roll data when they were released later in the day. Speculators started the day by buying dollars after offshore losses on the dismal US manufacturing data, but later sold them off upon seeing the greenback capped at 122.07 yen. The investors were rumoured to be lining up sell orders above 122 yen. At the end of the session, the dollar was at 121.78/83 yen against the late US level of 121.96.
In London, the sterling kept its upside bias staying near three-week highs against the dollar as fresh data showed the US labour market suffered its heaviest blow in more than two decades in October.
The pound stood at $1.4650, within half a US cent from a three-week high of $1.4687 set in the previous session. Against the euro, it was steady at 61.68 pence, unchanged from late New York levels on November 1, having hit eight-week highs of 61.33 pence earlier.