THE RUPEE: divergent trend

The rupee moved both ways against the dollar on the currency market during the week, ended on 5 February, 2011. On the inter-bank market, the rupee gained 25-paisa in relation to the greenback for buying and selling at Rs 85.40 and Rs 85.45.
On the open market, the rupee, however, shed five-paisa versus the dollar for buying at Rs 85.40 and it also fell by 10-paisa for selling at Rs 85.55. The rupee also showed weakness versus the euro, losing Rs 1.81 for buying and selling at Rs 118.90 and Rs 119.40 due to single European currency's unprecedented appreciation in terms of the global currencies.
The rupee moved cautiously versus the dollar, as importers' were active to purchase the US currency to meet the payment requirements.
In the meantime, upward trend in the remittance and country's reserves position help the rupee to resist sharp losses in terms of the dollar. According to the State Bank of Pakistan (SBP) report, country's foreign exchange reserves fell to 17.50 billion dollars in the week ending February 26, down from a record 17.59 billion dollars the previous week.
INTER-BANK MARKET RATES: On Monday, the rupee inched up versus the dollar, gaining one paisa for buying and selling at Rs 85.64 and RS 85.69.
On Tuesday, the rupee moved slightly after picking one paisa against the dollar for buying and selling at Rs 85.63 and Rs 85.68.
On Wednesday, the rupee moved up versus the dollar, gaining three paisa for buying and selling at Rs 85.60 and Rs 85.65. On Thursday, rupee maintained its upward trend against the dollar, gaining 10 paisa for buying and selling at Rs 85.50 and Rs 85.55.
On Friday, the rupee was higher against the dollar, gaining 10 paisa for buying and selling at Rs 85.40 and Rs 85.45.
On Saturday, the rupee was unchanged against the dollar for buying and selling at Rs 85.40 and Rs 85.45.
OVERSEAS OUTLOOK FOR DOLLAR: In the first Asian trade, the dollar found a steadier footing on Monday, as market players covered short positions ahead of a series of important events this week that could drastically change its recent range-bound trend.
The Swiss franc remained firm, however, both against the dollar and the euro, as ongoing tensions in Libya and fears of contagion kept its safe-haven attraction intact.
The dollar index, which tracks the greenback's performance against a basket of major currencies, was little changed at 77.193, off a three-week low of 76.945 plumbed last week. A break below 76.881 would have the index back at lows not seen since early November.
Indian rupee was trading at Rs 45.32 versus the dollar, Malaysian ringgit was available at 3.0530 in relation to the greenback and Chinese yuan was at 6.5770 in terms of the US currency.
Interbank buy/sell rates for the taka against the dollar on Monday. 71.30/71.32 (previous 71.30/71.30). Call Money Rates: 11.00-12.00 percent (previous 10.50-12.00 percent).
In the second Asian trade, the dollar struggled to regain its footing after a steep decline, while the euro hovered near a one-month high as investors bet the Federal Reserve will stick to its easing course even as the European Central Bank talks of tightening.
Fed Chairman Ben Bernanke is expected to remain cautious about the economy at his semi-annual testimony before the Senate Banking Committee starting at 1500 GMT.
In the words of New York Federal Reserve Bank President William Dudley: "We're still very far from achieving our dual mandate of maximum sustainable employment and price stability."
This puts the Fed at odds with other major central banks, which are starting to worry about rising price pressure, and reinforces the view that the European Central Bank will probably hike rates before the Fed.
The dollar index, which tracks its performance against a basket of major currencies, edged up 0.1 percent to 76.948, but still remained close to a 3-1/2 month low of 76.756 hit on Monday.
Indian rupee was trading at Rs 45.11 versus the dollar, Malaysian ringgit was available at 3.0385 in relation to the US currency and Chinese yuan was at 6.5703 in terms of the greenback.
In the third Asian trade, the euro fell slightly on Wednesday after yet again failing to break through a key resistance level, helping lift the dollar off a 3-1/2 month low against a basket of currencies.
However, further declines for the common currency may be limited a day ahead of a European Central Bank meeting. Given that euro zone inflation is well above the ECB's target, markets expect the central bank may sharpen its anti-inflation rhetoric.
Indian rupee was trading at Rs 44.94 versus the dollar, Malaysian ringgit available at 3.0400 in relation to the dollar and Chinese yuan was at 6.5726 in terms of the greenback.
In the fourth Asian trade, the euro hovered near a four-month high versus the dollar on expectations the European Central Bank will move towards an eventual rate hike, though the currency faces a near-term risk of profit-taking.
With many market players already counting on the central bank to send strong signals that it will raise rates to counter inflation, there is a risk the euro will slip after an ECB meeting on Thursday, some traders said.
The euro has rallied nearly 3 percent from a low hit on February 14, as investors expect ECB chief Jean-Claude Trichet to sharpen the central bank's anti-inflation rhetoric after its policy meeting, as oil prices continue to soar.
Some market players think the bank will stop providing unlimited three-month liquidity in the second quarter, switching the operations back to capped-limit, variable rate tenders - a step forward in exiting from its easy policy to pave the way for a rate hike.
But others see the chance of the bank extending the measure in light of lingering worries about bank funding in some euro zone periphery countries - an outcome that could set back market expectations of a rate hike by August.
Indian rupee was available at Rs 44.94 versus the dollar, Malaysian ringgit was available at 3.0307 in relation to the greenback and Chinese yuan was trading at 6.5688 in terms of the US currency.
In the final session of Asian trade, the euro took a breather in its explosive rally ahead of influential US jobs data due shortly, but the single currency is set to stay in demand after the European Central Bank signalled it may raise interest rates as early as next month.
While the ECB had been expected to step up its anti-inflation rhetoric, nobody actually thought ECB President Jean-Claude Trichet would explicitly say an interest rate rise at the next meeting was possible.
"The market was unprepared for Trichet to lay the foundation for an April rate hike," said David Watt, strategist at RBC Dominion Securities.
Euro interest rate swaps soared across the curve with the two-year rate hitting 2.30 percent, highs not seen since early 2009.
Indian rupee was trading at Rs 45.04 versus the US currency, Malaysian ringgit was trading at 3.0290 in relation to the greenback and Chinese yuan was available at 6.5705 versus the dollar.
At the weekend, the dollar eased to a four-month low against major currencies and looked set to extend losses after a solid US February jobs report did little to alter expectations for Federal Reserve monetary policy.
The euro broke above the psychologically important $1.40 level and headed for its biggest weekly rise in six weeks. The single currency is on course to make a run toward $1.4283 - a key resistance level touched last November - after European Central Bank President Jean-Claude Trichet hinted on Thursday at an April interest rate rise.
The US dollar is likely to fall in the week ahead, as investors continue to bet that interest rates in the euro zone will rise ahead of those in the world's largest economy.
US February jobs data came in a touch better than expected on Friday but disappointed investors who had hoped for an even stronger report.
Investors see strong US jobs growth as necessary for the Federal Reserve to end its second round of quantitative easing and instead tighten monetary policy by raising rates.
OPEN MARKET RATES: On February 28, the rupee continued its week-end slide versus the dollar, losing 15 paisa for buying and selling at Rs 85.60 and Rs 85.80. The rupee also fell in relation to the euro, dipping 89-paisa for buying and selling at Rs 117.98 and Rs 118.48.
On March 1st, the rupee shed 5-paisa in relation to the dollar for buying at Rs 85.65 and it retained its selling at Rs 85.80. The rupee also fluctuated slightly versus the euro, gaining three-paisa for buying and selling at Rs 117.95 and Rs 118.45.
On March 2nd, the rupee posted fresh gain of 20-paisa in relation to the dollar for buying at Rs 85.45 and it also rose by 15-paisa for selling at Rs 85.65. The rupee also appreciated in relation to the euro, rising 45-paisa for buying and selling at Rs 117.50 and Rs 118.00.
On March 3rd, the rupee posted fresh gain of five-paisa in relation to the greenback at Rs 85.40 and Rs 85.60. The rupee, however, fell in terms of the euro, losing 45-paisa for buying and selling at Rs 117.95 and Rs 118.45.
On March four, the rupee held the overnight level versus the dollar for buying at Rs 85.40, while it rose by five-paisa for selling at Rs 85.55. The rupee lost 95-paisa in relation to the dollar for buying and selling at Rs 118.90 and Rs 119.40.
On March 5, the rupee held its overnight level versus the dollar for buying and selling at Rs 85.40 and Rs 85.55. The rupee did the same in terms of the euro for buying and selling at Rs 118.90 and Rs 119.40.