Weak sentiment persisted in the local currency market this week. The rupee further weakened as the dollar forward buying pushed the rupee down in both open and inter-bank market. Currently, the rupee in the open market is at its lowest level.

It has already crossed Rs64 barrier. Since January this year, the rupee has depreciated by slightly over five per cent against the dollar and 12 per cent against the euro in the open market. Most currency analysts predict further weakening of the rupee in coming weeks. However, the trend in the local market seems unpredictable according to some currency leaders, particularly in the present economic scenario, both nationally and internationally.

In the inter-bank market, the rupee/dollar parity continued its downtrend on the opening day of the week in review. The rupee lost sharply against the dollar, changing hands at Rs63.43 and Rs63.46 amid rising dollar demand on April 14. It was down 24 paisa against previous week close of Rs63.19 and Rs63.23. The rupee further extended its decline versus the dollar on April 15, shedding 16 paisa more on the buying counter and another 16 paisa on the selling counter on persistent strong dollar demand by the importers forcing it to trade at Rs63.58 and Rs63.62 on the second trading day.

On April 16, however, the rupee managed to recover some of its losses on slight improvement in dollar inflows and traded at Rs63.50 and Rs63.54, gaining eight paisa over the previous day close. The rupee overnight strength over the dollar proved short lived as it came under renewed dollar buying pressure on April 17, when it posted fresh losses against the dollar, shedding 16 paisa to trade at Rs63.66 and 63.68. It seems the rupee in the inter-bank market is moving gradually and steadily to break Rs64 barrier in the next two weeks or so.

On April 18, the rupee finally touched the six-year low against dollar after shedding 24 paisa on the buying counter and another 26 paisa on the selling counter to trade at Rs63.90 and Rs63.94. Some leading experts said that the rupee was not able to retain its level. Earlier at one stage in the day, the rupee crossed the barrier of 63.90 and 64.02 due to excessive dollar demand by the importers. This week, the rupee in the inter-bank market lost 47 paisa against the dollar.

In the open market the rupee/dollar parity hit Rs64 mark on the opening day of the week after persistent importers demand for dollar in the inter-bank market exerted pressure on the rupee pushing it further down against the dollar. The rupee suffered fresh losses on April 14, when it was seen trading against the US currency at Rs63.90 and Rs64.00, down 10 paisa against last weekend’s Rs63.80 and Rs63.90. On April 15, mounting dollar demand forced the rupee to cross Rs64 mark, posting fresh losses of 20 paisa in relation to dollar and changing hands at Rs64.10 and Rs64.20.

Falling trend persisted on April 16, as the rupee further weakened versus the dollar, shedding another 25 paisa to trade at Rs64.35 and Rs64.45. But on April 17, the rupee managed to stage a turnaround, gaining 10 paisa against dollar to trade at Rs64.25 and Rs64.35 despite the rising demand from the inter-bank market. On April 18, the rupee further dipped by 25 paisa and traded at Rs64.50 and Rs64.60 against the dollar. During the week in review, the rupee in the open market shed 70 paisa versus the dollar.

Versus the European single common currency, the rupee staged a strong turnaround on the week’s opening day as it managed to recover 60 paisa in single day trading on April 14 when euro at Rs99.85 and Rs99.95, after closing last week at Rs100.45 and Rs100.55. But on the following day, the rupee could not hold ground versus the European currency and suffered a sharp fall, losing Rs1.15 on its overnight levels to trade at Rs101.00 and Rs101.10 on April 15.

The rupee continued its declining trend versus euro and further shed 15 paisa, changing hands at Rs101.30 and Rs101.40 on April 16. It extended its losses on April 17, further shedding 75 paisa and trading at Rs102.05 and Rs102.15 as euro strength against the dollar in the international market pushed euro value in the local currency market. The rupee further lost 20 paisa versus euro to trade at Rs102.25 and Rs102.35 on April 18. On cumulative basis, the rupee this week managed to recover 20 paisa against the European single common currency.

In the international financial markets, the dollar was little changed on the opening day of the week as more banking sector stress added to worries about the US economy, overshadowing a Group of Seven warning on the threat sharp exchange rate moves pose to financial stability. In late New York trading on April 14, the euro was trading at $1.5806, near its closing level of last week. The dollar edged up 0.1 per cent to 101.04 yen after earlier falling to 100.31 following news of Wachovia’s losses. It got some support from data showing US retail sales for March unexpectedly rising. The pound was up 0.7 per cent at $1.9855.

On April 15, the dollar posted gains, boosted by surprisingly robust US inflation and manufacturing data, which suggested the Federal Reserve may be less aggressive in cutting interest rates. In late New York trade, the euro fell 0.4 per cent against the dollar to $1.5778, having retreated from an overnight peak of $1.5875. Last week, it rose to $1.5912, the highest level since its 1999 launch. As the euro broke below $1.58, investors covered their short positions against the dollar, pushing the currency pair lower. There is still the possibility that euro/dollar could break above $1.60, but the momentum has stalled and markets could see a sustained turnaround in the dollar by the second half of the year.

The dollar shed 10.5 per cent against the euro last year and has weakened over 8 percent so far in 2008, a slide driven by a Fed that has cut benchmark interest rates by three percentage points since the onset of a housing-led credit crunch in August. Against the yen, the dollar traded at 101.58 yen, off a session peak of 101.79 yen, but still up 0.5 per cent. Sterling was hammered across the board, sliding more than 0.8 percent to $1.9619, its lowest since late February, after US PPI rose 1.1 per cent in March from the previous month

On April 16, the euro vaulted to a lifetime peak against the dollar as record high euro zone inflation and a sharp slide in US home construction highlighted the divergent growth paths of the two economies. It rose to $1.5977, its strongest since its 1999 launch, as data showing a record 3.6 per cent advance in euro zone prices last month suggested the European Central Bank won’t cut interest rates soon. The outlook for the Federal Reserve was quite different, especially after reports showed a sharp slide in US March housing starts and unexpectedly low consumer price inflation.

The euro last traded at $1.5965, up 1.1 per cent from previous day close. Elsewhere, the greenback was changing hands at 101.45 Japanese yen, off a session low of 100.83 yen, but still down 0.3 per cent on the day. It also fell 0.8 per cent to 0.9988 Swiss franc and weakened more than 1 percent against the Canadian and Australian dollars. Sterling rose 0.4 per cent to $1.9729, with the dollar broadly weighed down by worries about earnings at heavyweight US corporates reporting this week.

On April 17, the dollar posted gains as investors felt more confident about the outlook for the troubled financial sector, with US companies’ earnings so far generally revealing no major negative surprises. In late New York trade, the euro fell 0.4 per cent to change hands at $1.5880. Earlier it had soared to a record just shy of $1.60 before retreating when Eurogroup head Jean-Claude complained about the currency’s strength against the dollar. The dollar was up about 0.9 per cent against the Japanese yen at 102.64 yen and rose 0.8 per cent against the Swiss franc to 1.0075 francs. Sterling rose 0.9 per cent to $1.9903.

At the close of the week on April 18, the dollar steadied against the yen and the euro, clinging to gains made the previous day as investors grew more confident about the outlook for the troubled US financial sector. In Tokyo, the dollar inched down 0.1 per cent to 102.40 yen hovering near a one-month high of 102.95 yen hit in early April. The euro was little changed at $1.5905. It fell from its high versus the dollar on April 17 due to remarks by Jean-Claude, chairman of a group of euro zone finance ministers. Sterling was up 0.1 percent at $1.9928, having earlier hit a peak of $1.9997 in London.