Political uncertainty ahead of general election has depressed trading and business activities. Weak economic indicators, persistent high government borrowings and sharply deteriorating trade and payment deficits have lead to rising demand for dollars.

In the local currency market, the rupee is under persistent pressure since past few months. All round decline was seen in the currency market, amid fluctuations, this week. According to most analysts present situation is likely to prevail even after the general election to be held on February 18. The day has been declared as public holiday. Leading currency traders fear further weakening of the rupee in coming months.

The rupee commenced the week on a dismal note on February 11, as the inter bank market observed the rupee extending weekend losses versus the dollar. The rupee posted a sharp decline of nine paisa over the previous week close of Rs62.83 and

Rs62.85 and traded at Rs 62.92 and Rs62.94 on the opening day of the week in review.

On February 12, the rupee, however, managed to recover marginally on the buying counter, while it remained unchanged on the selling counter. At close, the dollar was at Rs62.91 and Rs62.94.

The rupee again came under renewed pressure against the dollar on the third trading day, as it shed three paisa to trade at Rs62.94 and Rs62.96 on February 13. Persisted demand for dollars weakened the rupee further on February 14. The rupee shed two paisa, changing hands versus the greenback at Rs62.96 and Rs62.98. On February 15, the rupee hit the lowest level in the inter bank market since September 2001, after shedding 16 paisa in terms of the greenback and traded at Rs63.12 and Rs63.14. This week, the rupee lost 29 paisa against the dollar in the inter bank market.

In the open market, the rupee weakness versus the dollar persisted on the opening day of the week as demand for dollar continued to mount. It shed 10 paisa on the buying counter and 11 paisa on selling counter to trade at Rs63.00 and Rs63.10 on February 11 after closing last week at Rs62.90 and Rs62.99 against the dollar. The rupee continued its weakness against dollar on February 12, and further shed 10 paisa, trading at Rs63.10 and Rs63.20 against the dollar. The rupee failed to come out of its weak spell versus the US currency and further extended its overnight losses on the third trading day of the week, shedding another five paisa and exchanging hands against the dollar at Rs63.15 and Rs63.25 on February 13.

On the following day, the rupee posted fresh losses as the dollar strengthened against major currencies in the world market. The rupee lost 15 paisa in single day trading. The dollar touched new highs in the local market, closing the day at

Rs63.30 and Rs63.40 on February 14. On February 15, the rupee in the open market managed to gain over the dollar for the first time this week. It recovered five paisa over its overnight levels, changing hands at Rs63.25 and Rs63.35 against the dollar. The rupee in the open market lost 25 paisa against the American currency during the week in review.

Versus the European single common currency, the rupee continued its declining trend, extending fresh losses on the opening day of the week. It lost 20 paisa and traded at Rs91.50 and Rs91.60 on February 11, after closing previous week at Rs 91.30 and Rs91.40. However, it managed to recover its losses on the second trading day and revert to its previous weekend level after gaining 20 paisa to trade at Rs91.30 and Rs91.40

The rupee failed to hold its overnight firmness against the euro on the third trading day, when it shed 45 paisa, changing hands Rs91.75 and Rs91.85 on February 13. The rupee continued its weakness versus the euro on February 14. It shed 10 paisa on the buying counter and 20 paisa at the selling counter to trade at Rs91.85 and Rs92.05. On February 15, the rupee further shed 55 paisa in relation to the euro and traded at Rs92.40 and Rs92.60, bringing cumulative losses against the European single common currency to 110 paisa this week.

On the international front, the yen rose broadly on the week’s opening day as investors grew more risk averse while the euro eked out a small gain against the dollar as the market weighed inflation remarks from monetary policy-makers. The euro, coming off its worst week against the dollar in 1-1/2 years, had edged up overnight after European Central Bank governing council member told a German newspaper the central bank had not relaxed its view on inflation. But it pared most of those gains in New York trade as fears of more credit fallout reinforced views that the ECB will have to cut interest rates this year.

The dollar fell 0.4 percent to 106.91 yen and the euro was down 0.3 percent at 155.27 yen. The Australian dollar was among the best performing major currencies, rising 1 percent against the dollar to $0.9041 after the central bank warned it would likely need to raise interest rates again to counter inflation. Sterling held largely steady against the dollar paring earlier losses after a surge in wholesale UK inflation cooled forecasts of how much the Bank of England will cut interest rates. It was flat at $1.9445 after having touched a session high of $1.9529.

On February 12, the yen fell broadly after billionaire Warren Buffett offered to assume troubled bond insurers’ liabilities. The move reigned risk appetite, sparking a global stock markets rally and sending the low-yielding yen tumbling across the board. Investors often use the yen to fund acquisitions of higher yielding assets and currencies. The euro jumped to a session high of 157.05 yen, before retracing slightly to trade at 156.46 yen, still 0.7 percent higher on the day. It firmed 0.4 percent to 1.6066 Swiss francs.The dollar firmed 0.3 per cent to 107.27 yen, but fell against the euro, which raced to a session peak of $1.4614, before easing to $1.4581 - up about 0.4 percent from the week’s opening day. A retreat by US stocks’ off earlier highs limited the euro and the dollar’s advance versus the yen. Analysts said the offer to bond insurers did not signal the end of market turmoil, and many said it did little to address underlying credit problems. Sterling rallied against the dollar as an improvement in risk appetite pushed the greenback broadly lower and eclipsed somewhat tame UK inflation figures which suggested the Bank of England has more room to cut interest rates. It was up 0.5 per cent at $1.9600.

On February 13, the dollar climbed to a one-month high against the yen after government data showed an unexpected rise in US retail sales last month, easing concern that the US economy will fall into a recession. The gain in January retail sales bucked market expectations for a drop in monthly US cash register receipts, though analysts said the outlook for both the economy and the dollar remained uncertain. The dollar jumped against the yen after the data, rising to a one-month high of 108.37 yen before easing to 108.25 yen, up 0.9 per cent from a day earlier. Yet even at current levels, the dollar remains in a downward trend that began in June 2007, when it rose above 123 yen.

The euro was down 0.1 per cent at $1.4569 after hitting a session low at $1.4533. It rose 0.8 per cent to 157.77 yen. Sterling rose to two-week highs against the euro and steadied versus an otherwise buoyant dollar after the Bank of England signalled that interest rates will be eased more modestly than markets were discounting. The pound’s yield appeal was boosted after the BoE said in its quarterly inflation report that inflation will likely overshoot the central bank’s 2 percent target if it cuts rates as aggressively as markets had expected. Sterling was flat versus the dollar at $1.9600.

On February 14, traders pushed the euro up to $1.4637, up 0.5 percent from previous day and close to the $1.4647 session peak. Dollar fell from an earlier one-month high of 108.61 yen to 107.96 yen, down 0.3 percent from a day earlier. Sterling rose to two-week highs versus the euro and one-week peaks against the dollar. It was up 0.35 per cent at $1.9700, with the dollar coming under more pressure after Federal Reserve chairman said the US economic outlook had worsened.

At the close of the week on February 15, the dollar edged up from late New York levels to 108.00 yen. It had slipped to around 107.65 yen in early Tokyo trade, roughly a yen lower than 108.62 yen touched on the previous day for the first time since mid-January. The single currency traded around $1.4640 little changed from late New York levels but holding gains made in the past week or so. Sterling was down 0.2 per cent against the dollar at $1.9653 after losing its grip on previous day’s 1-1/2 week peak of about $1.9738.