THE RUPEE: volatile trade

Volatility was witnessed on the money market during the week, ended on April 7, 2011 as the rupee moved both ways. On the inter-bank market, the rupee lost 52 paisa in relation to dollar for buying at 85.20 and 55 paisa for selling at 85.25 due to strong demand for dollars by importers.
On the open market, the rupee lost 30 paisa versus dollar for buying at 84.75 and 25 paisa for selling at 84.90. The rupee, however, posted a rise of Rs 3.80 in terms of euro for buying and selling at Rs 120.60 and Rs 121.10.
Early in the week, the rupee firmly held its level versus dollar, while it tumbled at the weekend as a result of strong dollar buying by importers to meet the payment requirement. Bostan Khan, chairman of Forex Association of Pakistan (FAP), said that rupee came under pressure versus dollar partly because of rising uncertainties in political situation, both locally and globally. Tensions increased between Pakistan and US due to Osama. On the economic front, if exports show better performance, the reserves may pick up, he said. The other factor behind the fall of the rupee against dollar was the latter's strength in the international market, some experts said.
In the meantime, the rupee gained versus euro and some other currencies, such as Deutsche mark. It is expected that it may trade in 84-85 range against dollar.
INTER-BANK MARKET RATES: On Monday, the rupee rose by 13 paisa versus dollar for buying at 84.55 and 10 paisa for selling at 84.60.
On Tuesday, the rupee picked up 22 paisa in relation to dollar for buying and selling at 84.33 and 84.38.
On Wednesday, the rupee lost 27 paisa in relation to dollar for buying and selling at 84.60 and 84.65.
On Thursday, the rupee gained seven paisa in relation to dollar for buying and selling at 84.53 and 84.58.
On Friday, the rupee lost 17 paisa versus dollar for buying and selling at 84.70 and 84.75.
On Saturday, the rupee lost 50 paisa versus dollar for buying and selling at 85.20 and 85.25.
Marketmen said that all major banks bought approximately 50-70 million dollars to meet the importers' demand to clear payments.
After a long time, nearly 40-50 paisa difference was seen between the rates of open market and inter-bank market.
OVERSEAS OUTLOOK FOR DOLLAR: In the first Asian trade, the US dollar rebounded from a three-year low against a basket of currencies as news that a US-led operation had killed al Qaeda leader Osama bin Laden prompted short-covering in a heavily-sold greenback, though traders think any impact will be temporary.
The currency was due for a corrective rebound, dealers said, with players having sold dollars against pretty much everything from the euro and commodity currencies to oil and precious metals for the past few weeks.
Interbank buy/sell rates for the taka against dollar on Monday were 72.94/73.00 (previous 72.89/72.98), and Call Money Rates: 4.00-8.50 percent (previous 5.00-7.00 percent)
Indian rupee eased on demand for dollars from oil refiners and tracking euro's drop against US unit, and traders said the market should be range-bound ahead of the central bank's policy on Tuesday. At 11:17 am (0547 GMT), the rupee was at 44.3125/3175 per dollar, 0.2 percent weaker than its previous close of 44.21/22.
In the second Asian trade, the dollar struggled to pull away from a three-year trough with higher-yielding currencies such as the Australian dollar still seen in favour even as markets became more concerned over stretched positions.
A steep fall in silver the previous day highlighted just how vulnerable overbought assets can be to a sudden sell-off and suggested investors may be primed to take profits.
The dollar index, which tracks its performance against a basket of major currencies, was last up 0.1 percent at 73.026, still not far off a three-year low of 72.722 hit this week. Its decline in the past few weeks had taken it ever closer to a record low of 70.698 set in March 2008.
"There could be some exhaustion in terms of dollar selling. The fact is, from a pure market positioning perspective, the market is extremely short of US dollars," said Mitul Kotecha, head of global FX strategy at Credit Agricole in Hong Kong.
Indian rupee was trading at Rs 44.33 versus dollar, Malaysian ringgit at 2.9715 and Chinese yuan was at 6.4998.
In the third Asian trade, the dollar rose broadly, pulling away from a three-year low hit earlier in the week against a basket of major currencies, as investors locked in profits in the wake of a relentless slide in US currency.
The dollar climbed against commodity-linked currencies such as New Zealand dollar and Australian dollar, which had succumbed to profit-taking after a sharp drop in silver earlier in the week.
The dollar also gained ground against emerging Asian currencies as investors scaled back overstretched positions, and edged higher against euro.
Some gauges of market positioning suggested that speculators and hedge funds had hefty short dollar positions against emerging Asian currencies as well as currencies such as Australian dollar, leaving open the possibility of more position unwinding and a further rebound in US currency.
But with the Fed having signalled previous week that US interest rates would stay long for a prolonged period, investors would probably look for fresh opportunities to sell dollars, said Rob Ryan, FX strategist at BNP Paribas in Singapore.
Indian rupee was trading at Rs 44.51 versus dollar, Malaysian ringgit at 2.9785, and Chinese yuan was at 6.4984.
Interbank buy/sell rates for taka against dollar were 73.03/73.10 (previous 72.97/73.03), and Call Money Rates: 5.00-7.25 percent (previous 4.75-7.30 percent.
In the fourth Asian trade, euro hovered near a 17-month high against a struggling dollar as investors looked for the European Central Bank to reinforce expectations of higher rates after its policy meeting later in the day.
Markets were waiting to see if the ECB chief Jean-Claude Trichet would use its "strong vigilance" code words to signal a follow-up rate rise in June to the initial move in April as the central bank would step up its fight against inflation.
Inter-bank buy/sell rates for taka against dollar were 73.10/73.15 (previous 73.03/73.10) and Call Money Rates 5.00-7.25 percent (previous 5.00-7.25 percent).
Indian rupee was trading at Rs 44.46 versus dollar, Malaysian ringgit at 2.9850, and Chinese yuan was at 6.4960.
In the final Asian trade, dollar held on to most of the chunky gains it had made the previous day, with key resistance levels in its grasp as tumbling commodity prices and a series of soft US data prompted profit-taking in higher-yielding currencies.
The euro jumped after ECB policymaker Ewald Nowotny said that markets had over-interpreted the central bank's stance on interest rates the previous day. The single currency rose around 50 pips to roughly $1.4575 after Nowotny said the central bank's stance should not be interpreted as dovish. His comments pushed up euro, which had been rising due to Asian sovereign demand around $1.4530, traders said. But the single currency's rise was capped around $1.4580, where traders cited sovereign offers.
The yuan ended little changed against dollar on Friday, after the People's Bank of China kept the currency relatively stable and yuan was expected to push higher after next week's US-China economic dialogue. Spot yuan closed at 6.4938 versus dollar at midday, almost flat from Thursday's close of 6.4937.
Indian rupee was trading at Rs 44.76 versus dollar, and Malaysian ringgit at 2.9975.
At the weekend, the euro headed for its worst week against dollar since January and further losses were seen as likely, as sovereign debt concerns reappeared after a German news report, later denied, suggested that Greece had raised the possibility of leaving the euro zone.
Spiegel Online reported that euro zone finance ministers were meeting in Luxembourg on Friday to discuss Greece, including the issue of its possible exit from the currency bloc. Greece, through its Finance Ministry, later denied it was considering leaving the euro zone.
The Greece headlines, however, were enough to send investors further unwinding long positions on euro, which hit a low of $1.43150 - its weakest level since April 19 on electronic trading platform EBS.
Market participants said the pullback in euro was a natural correction in a currency that, at one point, had surged more than 10 percent so far this year.
"What's happening today also reflects the fact that markets are increasingly unwilling to hold long euro positions into the weekend," said Vassili Serebriakov, senior currency strategist at Wells Fargo in New York.
OPEN MARKET RATES: On April 2, the rupee lost five paisa against dollar for buying at 84.50 while its maintained its week-end level for selling at 84.65. It, however, lost 38 paisa in relation to euro for buying and selling at Rs 124.78 and Rs 125.28.
On April 3, the rupee gained 10 paisa in relation to dollar for buying at 84.40 while it rose by five paisa for selling at 84.60. The rupee also rose by 33 paisa in terms of euro for buying and selling at Rs 124.45 and Rs 124.95.
On April 4, the rupee did not show any change versus dollar for buying at 84.40 while it rose by five paisa for selling at 84.55. The rupee was down by 73 paisa in terms of the euro for buying and selling at Rs 125.18 and Rs 125.68.
On April 5, the rupee shed five paisa in relation to dollar for buying and selling at 84.45 and 84.60. The rupee also lost 14 paisa versus euro for buying and selling at Rs 125.32 and Rs 125.82.
On April 6, the rupee lost 10 paisa against dollar for buying and selling at 84.55 and 84.70 in process of strong dollar buying. The rupee, however, gained sharply in terms of euro, picking up Rs 2.86 for buying and selling at Rs 122.46 and Rs 122.96.
On April 7, the rupee lost 20 paisa against dollar for buying and selling at 84.75 and 84.90. The rupee, however, posted steep gain in terms of the euro, picking up Rs 1.86 for buying and selling at Rs 120.60 and Rs 121.10.