Low buying interest in dollars and its smooth supply in the inter-bank market on the opening day of the week in review enabled the rupee-dollar parity to remain intact at its previous weekend’s level.
Internationally, the US currency is weak so the general public demand in the local market is low. Consequently, the rupee was stable at Rs57.80 and Rs57.82 for buying and selling against the dollar on March 17. However, rising fears about the war against Iraq, forced most of the foreign banks to indulge in short-term dollar buying and discouraged the rupee to give up its firmness, losing two paisa for buying and selling at Rs57.82 and Rs57.84, respectively, on March 18.
On March 19, the rupee recovered three paisa against the dollar in the inter-bank market for buying and selling at Rs57.79 and Rs57.90. The rupee was stable on March 20, maintaining its overnight levels versus the dollar at Rs57.79 and Rs57.80.
The rupee failed to maintain its stability over the dollar on March 21, and shed two paisa against the overnight level to trade at Rs57.81 and Rs57.83 for buying and selling, respectively. During the week as a whole the rupee, however, showed only one paisa gain over the dollar.
In the kerb the rupee commenced the week on a dismal note, slipping five paisa against the dollar on March 17, for buying and selling at Rs57.85 and Rs57.90, respectively. On March 18, the rupee remained static in relation to the dollar and held its overnight levels for buying and selling at Rs57.85 and Rs57.90, respectively. The rupee managed to gain 10 paisa on March 19. It traded for buying and selling at Rs57.75 and Rs57.85 against the dollar, respectively.
The rupee extended its overnight gains on March 20, picking up 15 paisa against the dollar in the kerb market for buying and selling at Rs57.60 and Rs57.70 after the military attacks started against Iraq. On the international financial market the dollar rallied sharply on March 17 on expectations a US-led war with Iraq, would begin very soon, and on speculation that it could end quickly. It rose to its highest levels in two months versus the euro and the Swiss franc, gaining more than one per cent in the session and extending rallies started late last week. In late New York trading, the dollar was up 1.2 per cent against both the euro and the Swiss franc at $1.0616 per euro and 1.3823 Swiss francs. Earlier in the trading day, the dollar had risen as far as $1.0589 per euro and 1.3870 francs, its highest levels since January 16 of this year. Against the yen, the dollar rose 0.23 per cent to 118.50 yen. Sterling had fallen to $1.5667, down over one per cent from the previous New York close.
On March 18, in New York trading, the dollar was unchanged against the euro at $1.0629 per euro having earlier rallied to a new two-month high of $1.0543 in follow-through buying after big rally on March 17.
The dollar was up 0.19 per cent against the Swiss franc at 1.3835 francs. It was up 0.26 per cent versus the yen at 118.84 yen. Sterling fell to its lowest in over three months against the dollar as concern grew that the British prime minister would face a sizable revolt among his own party in a vote on Iraq. The pound also slid half a per cent against the euro, beyond 68 pence. Sterling fell as low as $1.5612 in the European mid-session, bringing its losses to five cents in less than a week.
On March 19, the dollar soared to its highest level in a month against the yen and advanced against European currencies as traders prepared for the start of a war in Iraq that most expect to be short. Dollar/yen, which up to now had been a laggard in the dollar’s recent rally, rocketed nearly 1.5 per cent to its highest level since mid-February. By late afternoon in New York, the dollar was trading at 120.46 yen up nearly two yen from previous day. The dollar extended its 7-day rally against the euro, rising another 0.7 of a per cent to $1.0559. The dollar rose 0.8 per cent against the Swiss franc to 1.3943 francs.
Sterling hit its lowest against the dollar in over three months at $1.5539 after the British prime minister suffered the biggest party revolt in modern history. By late afternoon in New York, the pound was trading at $1.5631, down 0.19 per cent on the day. The euro has fallen five euros, or 4.5 per cent, since March 17, when it became clear the United States was going ahead with military action against Iraq.
The dollar dropped from its highs against major currencies in volatile trade on March 20 after the US-led war to overthrow Iraqi President Saddam Hussein began. The dollar swung wildly shortly after the news of US air attacks on Baghdad spread around 0230 GMT, but steadied by late Asian trade as many players digested the conflict. The market also refrained from taking new positions as the dollar could move wildly again should fresh developments emerge.
The dollar has risen sharply against major currencies this week as players covered short positions amid hopes war would be swift and decisive. The greenback hit a one-month high of 120.65 yen on March 19 in US trade, up about two per cent since the start of the week. It also reached a two-month peak against the euro of $1.0542 on March 18. The dollar was quoted at 120.00/05 yen compared with 120.52/60 in late US trade. The euro stood at $1.0587/92 against $1.0559/65. The single currency was at 127.04/09 yen versus 127.28/39 in late US trade.
The dollar was steady for several minutes after initial reports of bombings and anti-aircraft gunfire in Baghdad, then rose about a quarter per cent against the yen and the euro before suddenly giving up the gains and losing further ground. The greenback was weighed down slightly after Bush said the war could be longer and more difficult than some had predicted. Although the dollar was off highs against the yen and the euro, the market was careful about selling the greenback too aggressively.
Sterling fell against the euro but held steady versus the dollar following the start of US-led military strikes on Iraq. Worse than expected British retail sales data also did the pound no favours. War worries have weighed heavily in recent days on the pound, which fell to a 3-1/2-month low versus the dollar on March 19 after the biggest parliamentary revolt in modern history by British Prime Minister Tony Blair’s Labour party over his hard-line Iraq stance.
The generally thin trade on foreign exchanges was focused mainly on the dollar rather than domestic economic data, which showed British retail sales growth fell to its lowest annual rate in 3-1/2 years. The pound was down half a per cent on the day versus the euro at 57.85 pence. Against the dollar, sterling was little changed on the day at $1.5661, but off previous day’s trough of $1.5536, it’s lowest since December 2.
At the close of the week on March 21, the dollar rose half a per cent against other major currencies hitting a one-month high on the yen, as US and British armoured forces thrust deep into southern Iraq, meeting only sporadic resistance. The dollar climbed as high as 120.97 yen, up over half a per cent on the day. The greenback was also advancing closer to recent two-month highs on the euro and safe-haven Swiss franc. It gained as much as half a per cent on the day to $1.0568 per euro and was up two-thirds of a per cent on the Swiss franc at 1.3953. Sterling gained more than half a per cent on the weakening euro but eased slightly on the dollar as markets hoped UK troops would not be bogged down in combat for long if the US-led forces defeat Iraq quickly. It traded just below a one-month high against the euro of 67.22 pence. Against the dollar, the pound was down 0.13 per cent since the previous session at $1.5643. Markets are still very cautious about the war, fearing new threats could be lurking ahead, and paying close attention to signs of casualties.