THE RUPEE: firm versus dollar

The rupee touched two-month high on both interbank and open currency markets market during the week ended on April 9, 2011. On the interbank market, the rupee recovered 43 paisa in relation to dollar for buying and selling at 84.97 and 85.02.
On the open market, the rupee rose by 30 paisa versus the greenback at 84.85 and 40 paisa for selling at 84.95. However, the rupee fell in terms of the euro, losing Rs 1.76 for buying and selling at Rs 122.30 and Rs 122.80.
In the middle of the week, the rupee rose as dollar supplies were strong to meet the demand by importers. It is expected that the rupee would now stay stable though some downward pressure may be seen in the medium to long-run as payments are likely to pick up.
The rupee has been supported in recent months by rising dollar inflows due to higher export proceeds as well as record inflow of remittances.
The rupee also appreciated versus dollar as the State bank of Pakistan (SBP) gave the nod for export of pound sterling, euro and dirham. In the meantime, if the demand for dollars increases, the rupee may not retain its present level in terms of the US currency.
INTER-BANK MARKET RATES: On Monday, the rupee gained two paisa in relation to dollar for buying at 85.38 and three paisa for selling at 85.42.
On Tuesday, the rupee gained 12 paisa in relation to dollar for buying at 85.26 and 11 paisa for selling at 85.31. On Wednesday, the rupee rose 11 paisa versus dollar for buying at 85.15 and 12 paisa for selling at 85.19.
On Thursday, the rupee gained 31 paisa in terms of dollar for buying and selling at 84.84 and 84.88.
On Friday, the rupee gained two paisa versus dollar for buying at 84.82 and paisa for selling at 84.85. On Saturday, the rupee lost 15 paisa versus dollar for buying at 84.97 and 17 paisa for selling at 85.02.
OVERSEAS OUTLOOK FOR DOLLAR: In the first Asian trade, the euro hit fresh 11-month highs against a broadly weaker yen and held firm against the dollar with markets all but certain that the European Central Bank would raise interest rates during the week. In contrast, the Bank of Japan was expected to downgrade its economic assessment at its meeting on Wednesday and consider finding more ways to help the economy recover from last month's massive earthquake and devastating tsunami.
Indian rupee was trading at Rs 44.59 versus dollar, Malaysian ringgit at 3.0245 and Chinese yuan at 6.547. Interbank buy/sell rates for taka against dollar was 72.79/72.81 (previous 72.80/72.80) and Call Money Rates at 4.00-6.00 percent (previous 4.00-8.50 percent).
In the second Asian trade, the euro hovered below a five-month high against dollar as investors assessed whether it could make fresh gains, given that market players had already positioned themselves for a series of interest rate hikes in the euro zone during 2011.
The European Central Bank was expected to raise rates by a quarter point from a record low of 1 percent at a meeting on Thursday to rein in inflationary pressures, with two more 25 basis point hikes priced in by year-end.
But the single currency had already risen more than 6 percent against dollar and more than 10 percent versus yen this year, making investors reluctant to buy more ahead of the meeting this week.
Indian rupee was trading at Rs 44.59 versus dollar, Malaysian ringgit was available at 3.0245 and Chinese yuan at 6.5477.
Interbank buy/sell rates for taka against dollar were 72.79/72.81 (previous 72.80/72.80) and Call Money Ratesat 4.00-6.00 percent (previous 4.00-8.50 percent).
In the third Asian trade, yen extended a steep decline, hitting a 2-1/2 year low against Australian dollar and an 11-month trough against euro, threatening a breach of long-term support levels that could pave the way for further losses.
The Japanese currency also hit a six-month low against the US dollar, with traders citing yen selling by macro hedge funds and Japanese importers.
The yen and other currencies with very low interest rates such as the Swiss franc slid over the past couple of weeks as market volatility declined, stirring talk about the revival of carry trades, a tactic of selling low-yielding currencies to fund investment in currencies with higher interest rates.
Indian rupee was available at Rs 44.42 versus dollar, Malaysian ringgit at 3.0240 and Chinese yuan at 6.5453. In the fourth Asian session, the euro held below Tuesday's 11-month high against yen and 14-month peak versus dollar as investors focused on how much room the European Central Bank had for raising interest rates beyond a widely expected tightening later in the day.
The yen remained near a six-month trough against dollar. The Bank of Japan (BoJ) was expected to keep monetary policy on hold but signal its readiness to ease policy further, bucking a global trend of central banks withdrawing excess liquidity put in place during the financial crisis.
Indian rupee was available at Rs44.16 versus dollar, Malaysian ringgit at 3.0250 and Chinese yuan was at 6.545.
Interbank buy/sell rates for taka against dollar were 72.80/72.86 (previous 72.80/72.83) and Call Money Rates were 5.50-12.00 percent (previous 4.25-9.00 percent).
In the final Asian trade, the yen hit an 11-month low against euro and neared a six-month trough versus dollar and was seen poised for more weakness due to widening yield differentials and concerns that Japan's exports might drop after last month's earthquake.
The euro climbed against yen and touched a 15-month peak against dollar, supported by market expectations that European Central Bank would raise interest rates further in coming months after a rate rise on Thursday.
Other than its rise against yen, the dollar came under broad selling pressure, sliding to a fresh 29-year low against Australian dollar, a record trough versus Singapore dollar, and a 16-month low against a basket of other currencies.
"The dollar and yen are coming under pressure as investors are more comfortable with risk," said Christopher Gothard, head of FX for Brown Brothers Harriman in Hong Kong.
Indian rupee was at Rs 44.20 in terms of the greenback, Malaysian ringgit at 3.0260 and Chinese yuan at 6.5390.
At the week-end, the euro rose to a 15-month high against dollar, supported by expectations of more euro zone interest rate increases, while the prospect of a US government shutdown pushed the dollar broadly lower.
The euro was also helped by reported Middle East sovereign demand.
The dollar was pressured as the White House and Congress worked frantically to break a US budget deadlock by the end of the day in order to avoid a government shutdown.
A shutdown will be far reaching, since among other actions it will stop the payment of government suppliers and possibly close private enterprises reliant on government operations. The lost wages and spending will ripple through to other areas of the economy at a time of uncertain economic growth, though some analysts noted that any impact would be short-lived and government spending for the year would be the same.
The ECB raised its key interest rate by 25 basis points to 1.25 percent on Thursday, and European Central Bank President Jean-Claude Trichet said policymakers were ready to tighten further if needed.
Expectations for interest-rate differentials will widen further in Europe's favour should buoy the euro against the dollar next week, while investors will closely watch US inflation data that could help shape Federal Reserve monetary policy.
The euro rose to a 15-month peak versus the dollar on Friday, on pace for a gain of 1.7 percent this week. The prospect of a US government shutdown, which would idle about 800,000 federal government workers and put a crimp in the economic recovery, weighed on the dollar.
The European Central Bank raised rates by 25 basis points on Thursday, its first hike since the 2008 financial crisis, and signalled it's ready to tighten further if needed. Expectations of higher rates boosted the euro even as Portugal became the third euro zone country to request a bailout.
OPEN MARKET RATES: On April 4, the rupee shed five paisa in relation to dollar for buying and selling at 85.20 and 85.340.
The rupee followed the same print versus euro, losing 20 paisa for buying and selling at Rs 120.74 and Rs 121.24.
On April 5, the rupee gained five paisa in relation to dollar for buying and selling at 85.15 and 85.35.
The rupee followed the same print versus euro, gaining 30 paisa for buying and selling at Rs 120.44 and Rs 120.94.
On April 6, the rupee gained eight paisa in relation to dollar for buying and selling at 85.07 and 85.27.
The rupee, however, lost in relation to euro, losing 98 paisa for buying and selling at Rs 121.42 and Rs 121.92.
On April 7, the rupee gained seven paisa in relation to dollar for buying and selling at 85.00 and 85.20.
The rupee also rose 56 paisa in relation to euro for buying and selling at Rs 120.86 and Rs 121.36.
On April 8, the rupee gained 10 paisa in relation to dollar for buying and selling at 84.90 and 85.10. The rupee, however, lost 75 paisa in relation to euro for buying and selling at Rs 121.61 and Rs 122.11.
On April 9, the rupee gained 5 paisa versus dollar for buying at 84.85 and 15 paisa for selling at 84.95. The rupee shed 69 paisa versus euro for buying and selling at Rs 122.30 and Rs 122.80.