On March 4, the rupee came under pressure and shed five paisa to stand at Rs58.05 and Rs58.10 for buying and selling respectively. Dollar demand has risen as people are anticipating a rise in its value if war with Iraq erupts.
However, against the euro, the rupee failed to show firmness and lost 65 paisa at Rs63.15 and Rs63.45 for buying and selling respectively.
On the following day however, the value of the rupee received a boost by 9 paisa at Rs57.92 and Rs57.94 for buying and selling respectively because of large inflows of the greenback.
The rupee fell further on March 6, by two paisa versus the dollar in the inter-bank market for buying and selling at Rs57.94 and Rs57.96 respectively.
The euro meanwhile has gained significant grounds due to rising demand in the world markets on worries of war in Iraq. On March 7, the euro managed to recover 35 paisa more against the rupee in the kerb market for buying and selling at Rs63.65 and Rs63.95 respectively.
In the international market on March 4, the dollar fell against major currencies in New York, Tokyo and London. In the New York market, poor US manufacturing data and setbacks in the preparations for a possible war on Iraq weighed in the dollar, sinking it to a new four year low against the Swiss franc.
The dollar’s descent was steady as traders were hard-pressed to come up with a specific impetus for the selling and instead pointed to the Turkish Parliament’s rejection of $30 billion in grants and loans from the United States for the use of Turkey’s airbases for an attack on northern Iraq.
The worst-case scenario for the dollar would be for the United States to wage of long, drawn-out war on Iraq with limited international backing. Turkey’s decision could delay any attack US-led forces launch, increase its costs for an already sluggish economy and leave uncertainty high, something markets loathe.
In London the dollar resumed its lowest since 1998 against the Swiss franc and testing a four year low on the euro as fears grew that the United States could attack Iraq without broad international support.
The dollar moved modestly higher against the Swiss franc, trading at 1.3395 francs, a gain of 0.18 per cent compared with March 3 New York close and above the four-year low of 1.3341 francs hit in late European trade.
The dollar managed to avoid a four-year low against the euro, coming within a whisker of last month’s nadir. The euro traded as high as $1.0936 before dropping back to $1.0882, a loss of 0.12 per cent on the day.
Dollar stability against the yen was ascribed to Japanese finance authorities stepping in an buying the greenback in order to keep the Japanese currency from strengthening, which in turn hobbles the fragile export sector for the economy.
On March 4, in the London market, sterling was at four year lows on the euro after data showed the UK house prices and retail spending slowed sharply last month, adding to economic gloom. Euro/sterling stayed fairly stable around the 69 pence levels.
The dollar’s fall on the first day of the week against the Swiss franc and euro inspired investors to turn around and sell those currencies to lock in profits. But the reversal in the dollar’s fortunes, traders said, did not signal an end to the greenback’s month long slide.
In Tokyo, the dollar hardly moved in Asia on March 6, ahead of a much-awaited rate-setting meeting of the European Central Bank (ECB) later in the day. In morning trade, the dollar ticked up on news that Britain has proposed giving Baghdad more time to disarm, suggesting to some dealers that the likelihood of an imminent US-led war against Iraq had been reduced.
Still, the greenback’s solace was temporary, with most market players betting that a war in Iraq is inevitable, possibly by mid-March, given Washington’s clear dissatisfaction with the progress of Iraq’s disarmament so far.
The single currency rose to a four-year peak of $1.1005 on March 5, in post Asian trade in the aftermath of US Treasury Secretary’s comments that he was not concerned about the dollar’s fall. Later however, in an effort to soothe the market, the Secretary said that he supported a strong dollar policy, but dollar sentiment remained grim. The euro was little changed at 128.59 yen against 128.54.
In the London market, the euro climbed versus the dollar after a European Central Bank interest rate cut on March 6, but held below a recent 4 year high as markets watched for signs that UN rifts over Iraq could be bridged.
The ECB shaved 25 basis points off its key market rate now at 2.5 per cent, going against recently rising expectations of a larger reduction. Conversely, the Swiss franc fell sharply against the dollar and the euro after the Swiss National But cut the top side of its key short-term interest rates range by half a percentage point.
The ECB was going to be important but the bigger picture is dictated by events on Iraq. There is also a lot of safe-haven attractiveness for the Swiss franc against the dollar. The euro climbed to $1.0986 after the rate cut, trading up towards four- year highs above $1.10 set on March 5, and a quarter per cent higher on the day.
The euro gained a bit of ground on the yen from the previous session, trading at 128.66. The dollar was also firm at 117.43 as continued wariness about cover Japanese yen-selling intervention gave it support.
The European commission does not see the euro-zone growing much faster in the first quarter of 2003, if at all. It forecast quarterly change in the euro zone’s gross domestic product ranging from a contraction of 0.1 per cent to a rise of 0.3 per cent. The Q-2 forecast ranges from 0.2 to 0.5 per cent growth.
By March 7, the dollar had fallen to a four year low against the euro in the Tokyo market, as the US maintained a hardline stance on disarming Iraq, reinforcing the view that war may be imminent. The euro was at $1.1017, its highest since March 1999, against $1.-972 in late US trade. The single currency was hovering at a three week high of 129.30 yen compared with 128.79 yen.
In the London market, the dollar fell through a sense of four year lows on the euro and plunged to a six month low on the yen, as market conviction mounted that war in Iraq is imminent.
The greenback held up for most of the European morning against the yen after Tokyo traders said Japanese authorities had intervened to curb export-damaging yen strength around 117.10 yen earlier in the day, but it plummeted suddenly as US trade started, forging a new six-month low at 116.57. Against the safe haven Swiss franc it was trading close to a recent four-year low below 1.33 francs.