Local currency market displayed mixed sentiments amid dull trading this week. The rupee stood firm versus the dollar and euro. Dollar supply improved significantly amid low demand. The inflow of $3.1 billion under the IMF $7.6 billion loan has released pressure on the rupee to some extent. The rupee this week resisted major decline versus the euro and dollar in the inter-bank as well as open market.
In the interbank market, the week commenced on a positive note on November 24. The rupee stood firm on its weekend level on easy dollar supply. It traded unchanged against the dollar on the buying counter, while gaining five paisa on the selling counter. As a result, the dollar traded at Rs79.05 and Rs79.10 during the day compared to last week close of Rs79.05 and Rs79.15. Upward rising trend in the rupee/dollar parity persisted on November 25, when the rupee further extended its overnight gains after the news that IMF has approved a $7.6 billion loan to avert balance of payment crisis. The rupee gained 15 paisa over the previous day’s close and traded at Rs78.90 and Rs78.95.The rupee firmness over the dollar remained intact on November 26. Comfortable dollar supply position amid low demand helped the rupee gained 15 paisa more versus dollar on the buying counter and 10 paisa on the selling counter to trade at Rs78.75 and Rs78.85.
The country received the first tranche of $3.1 billion from the IMF on Thursday which pushed up the foreign exchange reserves to $9.690 billion, but the rupee/dollar parity weakened. The rupee lost 15 paisa for buying and 10 paisa for selling, changing hands versus the dollar at Rs78.85 and Rs78.88 against the dollar on November 27
On November 28, the rupee in the interbank market stood firm against the dollar as it did not show any change on the buying counter and remained traded at its overnight level. However, it suffered minor losses on the selling counter and shed two paisa against the dollar. At the close of the day, the dollar was at Rs78.85 and Rs78.90. During the week in review, the rupee managed to recover against the dollar in the interbank market, gaining 20 paisa on the buying counter and another 25 paisa on the selling counter.In the open market, currency traders observed mixed sentiments this week. The rupee commenced the week on a positive note, as it managed to hold its firmness versus the dollar and gained 45 paisa over the previous week close of Rs78.15 and Rs78.65 to trade at Rs77.70 and at Rs78.20 on the opening day of the week in review. But on the following day, the rupee unable to hold its overnight firmness against the dollar suffered losses on both the counters. It lost 10 paisa on buying and 30 paisa on selling and traded at Rs77.80 and Rs78.50 on November 25.
The rupee, however, managed to recover 30 paisa for buying and 50 paisa for selling to trade at Rs77.50 and Rs78.00 on the third trading day. But it again suffered sharp losses of 50 paisa on the buying counter and 30 paisa more on selling counter and traded at Rs78.00 and Rs78.30 the fourth trading day of the week in review. Finally, on the fifth trading day, the rupee/dollar parity stood stable, trading unchanged at its overnight levels. Against the dollar, the rupee in the open market this week, displayed strength as it managed to gain 15 paisa on the buying counter and 35 paisa on the selling counter.
Versus the European single common currency, the rupee assumed falling trend and shed 45 paisa on the first trading day of the week. The euro was seen changing hands at Rs98.30 and Rs99.30 after closing last week at Rs97.85 and Rs98.85. On the second trading day, the rupee/euro parity moved both ways in a narrow range. While the rupee continued to slid on the buying counter and further shed 55 paisa against the euro, it managed to gain another 30 paisa on the selling counter, trading at Rs98.80 and Rs99.00 on November 25.
On November 26, the rupee weakened versus euro, shedding 70 paisa on the buying counter and another 100 paisa on the selling counter. It traded Rs99.50 and Rs100 during the day. However, the trend reversed on the following day after the rupee posted fresh gains of 20 paisa for buying and 50 paisa for selling with euro trading at Rs99.30 and Rs99.50 on November 27. On November 28, the rupee further extended its overnight firmness against the European single common currency, gaining 35 paisa on the buying counter and 20 paisa on the selling counter. At the close of the day, the euro was changing hands at Rs98.95 and Rs99.30. At this level, the rupee this week still suffered a fall of 110 paisa for buying and 45 paisa on selling in relation to euro.
In the international financial market, US dollar fell against the euro and a basket of currencies on the opening day of the week in review as risk aversion eased after the US government agreed to inject $20 billion of new capital to rescue troubled Citigroup. In New York, the euro was still up more than 2.7 per cent on the day versus the dollar at $1.2922 on November 24. It traded earlier as high as $1.2924, a two-week high. The dollar did manage gains against the yen, rising 1.2 per cent to 96.96 yen. The yen has benefited from rising risk tolerance illustrated by the rally in stocks. Sterling gained 1.75 per cent to $1.5148.
On November 25, the euro was up 1.2 per cent at $1.3070 in late New York trading, hitting three-week highs earlier at $1.3080. The euro has gained 4.9 per cent against the dollar in the last three sessions, the best three-day advance since its inception in January 1999 at current prices.
The dollar was down 1.4 per cent against the yen at 95.69 yen after going as low as 94.96 yen. The US public holiday on November 27 for Thanksgiving Day was also impacting trading, analysts said. Sterling hit a two-week high against the dollar as the US currency came under broad selling pressure after a Federal Reserve plan to boost the mortgage-related debt market quelled some risk aversion.
The dollar’s bout of weakness helped the pound to rebound sharply from a slide in early trade. Sterling traded 0.8 per cent higher at $1.5267. The pair recovered from a session low of $1.4984 to climb as high as $1.5395, its strongest since November 12. The pound was supported by a 0.3 per cent rise in UK share prices, which recovered from an early slide to extend a near 10 per cent jump in the previous session, when it clocked its biggest-ever one-day climb.
On November 26, the dollar gained against the yen, reversing earlier declines on the day, as US stocks rose, led by beaten-down large-cap technology shares that investors considered to have fallen too far, too fast. It last traded 0.5 per cent higher against the yen at 95.68 after declining to as low as 94.62. The euro was 1.3 per cent lower against the dollar at $1.2885. The dollar also gained 1.7 per cent against the Swiss franc to 1.5324 francs. Sterling fell 1.5 per cent to $1.5235.
On November 27, US markets were closed for Thanksgiving holiday. In Tokyo, the yen gained against the dollar and euro. The dollar fell 0.2 per cent to 95.41 yen while the euro rose 0.3 per cent to $1.2923, after falling as low as $1.2819 during the previous session partly on pessimistic views about the impact of a 200 billion euro ($258.4 billion) European stimulus plan to cope with the financial crisis. The euro had rebounded above $1.30 earlier this week, recovering from a 2-1/2-year low of $1.2329 hit in late October. Sterling inched up to a two-week high on a trade-weighted basis. It rose 0.1 per cent to $1.5365 in London.
At the close of the week on November 28, the yen kept its strength against the dollar in thin trade as fears of a long and deep global recession continued to highlight the relative safety of the low-yielding Japanese currency. The dollar was trading at 95.30 yen, down slightly from late European trade on November 27, when it was around 95.41 yen.
Demand from Japanese companies who needed to pay for imports at the end of the month briefly lifted the dollar to the day’s high of 95.61 yen, but sell orders from Japanese exporters repatriating overseas earnings pushed it back down.
The euro was steady at $1.2914 in late European trade. Sterling slipped almost half a per cent to $1.5320.