The rupee showed a firm trend versus the dollar and euro this week. The State Bank measures in recent days have helped the rupee from falling sharply in relation to dollar.

Currency experts were of the view that the rupee would soon breach through the barrier of Rs62, but the central bank’s strict vigilance did not allow it to hit fresh lows against the greenback this week.

The rupee/dollar parity remained under buying pressure. As a result, falling trend persisted in the interbank market on the opening day of the week. The rupee shed two paisa against the dollar, which traded at Rs61.27 and Rs61.29 on December 10, against the previous week close of Rs61.25 and Rs61.27. However, the rupee managed to recover on the second day of the week, as improved dollar supply helped the rupee to gain three paisa against dollar, changing hands at Rs61.24 and Rs61.26 on December 11.

On December 12, demand for dollar existed but easy dollar supply resisted any sharp decline in the rupee value, which shed only one paisa and traded at Rs61.25 and Rs61.27. The rupee further gained five paisa on the third trading day to trade versus the dollar at Rs61.20 and Rs61.22 on December 13. Rising supply of dollars boosted the rupee on the fifth trading day of the week. Dollar supply was strong to meet the demand. As a result, an appreciation of four paisa was observed in the rupee value against dollar which traded at Rs61.16 and Rs61.18 on December 14. During the week under review, the rupee in the inter bank market gained nine paisa against the dollar.

In the open market, the rupee commenced the week on positive note, as it gained 10 paisa in terms of the dollar on the buying counter and another five paisa on the selling counter at Rs61.30 and Rs61.45 after closing last week at Rs61.40 and Rs61.50. The rupee continued its upward rising trend versus the dollar on the second trading day. It gained five paisa for buying and ten paisa for selling to trade at Rs61.25 and at Rs61.35 on December 11.

On December 12, the rupee further extended its overnight gains on the buying counter, picking up five paisa, while it did not show any change on the selling counter, to close at Rs61.20 and Rs61.35. On the fourth trading day, the rupee was unable to hold past two days’ firmness and shed five paisa but remained unchanged on the selling counter, trading at Rs61.25 and Rs61.35. On December 14, the rupee managed to recover from its overnight weakness in relation to the dollar, as it picked up 15 paisa, changing hand versus the dollar at Rs61.10 and Rs61.20. This week, the rupee in the open market recovered 30 paisa against the dollar.

Versus the European single common currency, the rupee recovered 30 paisa and traded at Rs89.50 and Rs89.60 on December 10, after closing last week at Rs89.80 and Rs89.90. It, however, lost 18 paisa on December 11, when the euro was seen changing hands at Rs89.68 and Rs89.78. On December 12, the rupee gained 38 paisa and traded at Rs89.30 and Rs89.40. On December 13, the rupee lost 37 paisa to trade Rs89.67 and Rs89.77 against the euro. On December 14, the rupee managed to recover 37 paisa and traded at Rs89.30 and Rs89.40 against the dollar. During this week, the rupee recovered 50 paisa against the euro amid fluctuations.

On the international front, the dollar slipped against most major currencies on the opening day of the week in review for the third consecutive session, a day ahead of a widely expected Federal Reserve interest-rate cut aimed at staving off a recession. As recently as a few weeks ago, the dollar was supported by expectations of a half-percentage-point rate cut by the Fed, as dealers expected a kick start to the economy. However, persistent tightness in credit markets and lower expectations for such a big rate cut left the dollar back in a familiar downward trend.

The euro was up 0.4pc at $1.4712. It got a boost last week after comments from European Central Bank President left open the possibility of higher rates next year as a result of lingering inflation. The dollar was relatively unchanged against the yen, at 111.63 yen, above a 2-1/2-year low of around 107.20 yen hit last month. Sterling rose 0.8pc to $2.0480. The euro climbed 0.3pc higher against the Swiss franc to 1.6595 francs.

On December 11, the dollar fell sharply against the yen but rose against the euro after the US Federal Reserve took a step aimed at staving off a recession that was more modest than some expected. The Fed’s decision to cut both its benchmark and discount rates by a quarter-percentage point injected a sense of uncertainty into financial markets, while opening a small window of opportunity for the dollar to rise higher as dealers cut their bets against the greenback.

The Fed decision caused dealers to scoop up the low-yielding yen, anticipating unwind in carry trades. The dollar was down 0.6pc at 110.92 yen as confounded investors who had been looking for even lower borrowing costs sold off US stocks. The euro slipped 0.4pc on the day to $1.4655. It was probably also weighed down by its 1.3pc slide to 162.15 yen. Sterling fell 0.6pc to session lows of $2.0340. With uncertainty gripping markets, the high-yielding Australian dollar dropped 1.3pc to US $0.8730. The New Zealand dollar fell 0.9pc to US$0.7729.

On December 12, the yen tumbled and high-yielding currencies surged after coordinated steps by the Federal Reserve and other major central banks to ease liquidity squeeze boosted investors’ appetite for risk. Investors viewed the measures as a sign that central banks were being more responsive to the plight of global financial companies hurt by the difficult lending environment. Carry trades are the most dominant strategy in the $2 trillion a day currency market, involving borrowing in a currency with low interest rates to buy others with higher yields.

The yen, which has the lowest interest rates in the developed world, fell broadly. The dollar rose to a one-month high at 112.46 before retreating in late New York trade to 112.18, still up 1.4pc on the day. The dollar, however, slipped against the euro, with the single currency trading up 0.4pc at $1.4705, while sterling rose 0.6pc against the dollar to $2.0468.

On December 13, the dollar rose after US retail sales and producer prices data strengthened the view that the US economy will not slip into a recession despite a persistent credit crunch. The unexpectedly high numbers underpinned the modest scale of the Federal Reserve’s quarter-percentage-point interest rate cut amid widespread criticism the US central bank could have done more to ease the pain from the credit crisis.

The euro fell 0.6pc against the dollar to $1.4620 after triggering a series of automatic sell orders on the way down to a session low of around $1.4579. Last week, the euro hit a 1-month low of $1.4610. The dollar rose 0.6pc against the Swiss franc to 1.1415 francs. Sterling slid 0.4pc to $2.0390, hit earlier by weak British housing data. Against the yen, the dollar was largely unchanged at 112.23 yen.

At the close of the week on December 14, the dollar rose to a one-month high against the yen on extending gains from overnight after solid US data eased concerns that the US economy was slipping into recession while the Bank of Japan’s Tankan survey worsened more than expected. Both retail sales and producer prices for November beat market expectations and strengthened the view that the US economy is more resilient than previously thought despite a lingering credit crunch.

In Tokyo, the dollar got a boost against the yen after the BoJ’s quarterly survey showed corporate sentiment had worsened more than expected in the past three months. Traders remain skeptical over further dollar gains due to worries about the US growth outlook and the effectiveness of efforts by major central banks to provide liquidity to combat global credit problems.

The dollar was up 0.2pc at 112.45 yen after rising as high as 112.66 yen, its highest since early November. Traders said dollar selling orders from Japanese exporters lined up above 112.50 yen, helping push back the US currency below that level. The euro was steady at $1.4620 and up 0.2pc against the yen at 164.45 yen. Sterling fell versus a broadly stronger dollar ending the week on a subdued note after weak UK housing numbers contrasted with higher than expected US inflation data. The pound was down 1pc versus the dollar at $2.0208.