The local currency market witnessed mixed sentiments this week. The demand for dollar was strong amid slow trading activities. The rupee remained under pressure.

However, due to easy dollar inflows, the rupee managed to resist sharp decline versus the American currency. Since January this year, the rupee has so far depreciated by nearly 21 per cent against the dollar and by around 16 per cent against the euro.

Strong demand for dollar throughout this period has kept the rupee under pressure. The rupee in the recent weeks, has however, resisted any sharp fall in its value against the American currency.

In the inter-bank market, the rupee/dollar parity remained weak. Downward trend in the parity persisted throughout the week due to strong dollar demand. The market commenced the week on a negative note, with the rupee shedding 15 paisa against the dollar. The dollar was at Rs78.85 and Rs78.95 on December 22, against last week close of Rs78.70 and Rs78.80.

On December 23, the rupee retain its overnight level on the buying counter but it managed to gain five paisa on the selling counter, with dollar changing hands at Rs78.85 and Rs78.90.

On December 24, the rupee continued its decline versus the dollar in the inter-bank market. It suffered three paisa decline for buying and two paisa loss on the selling counter to trade against the dollar at Rs78.88 and Rs78.92. The trading remained suspended on December 25 on account of Christmas and Quaid-e-Azam holiday. On cumulative basis, the rupee in the inter-bank market lost 18 paisa on the buying counter and 12 paisa on the selling counter against the dollar during the week in review.

In the open market, the rupee/dollar parity remained strong as the rupee continued to hold its firmness versus the dollar. After closing last week at Rs79.50 and Rs80.00, the rupee, however managed gain versus the dollar on the opening day of the week in review, recovering 50 paisa on the buying counter and 20 paisa on the selling counter to trade at Rs79 and Rs79.80 on December 22.

The upward rising trend persisted on December 23, when the rupee managed to further extend its overnight gains versus the American currency. At the close of the day, the dollar was changing hand at Rs78.50 and Rs79.50 after gaining another 50 paisa on the buying counter and 30 paisa on the selling counter.

However, on the third trading day, the rupee failed to hold its firmness versus the dollar on the buying counter, where it lost 50 paisa but managed to hold its overnight level on the selling counter to trade at Rs79 and Rs79.50 on December 24.

The market was closed on December 25, being public holiday. In three days trading this week, the rupee in the open market, however, recovered 50 paisa against the dollar.

Versus the European single common currency, the rupee continued to weaken. It further lost Rs1.40 on the buying counter and 90 paisa on the selling counter on the opening day of the week in review. At day close, the euro was at Rs108.90 and 109.40 against last week’s Rs107.50 and Rs108.50, as the dollar fell against euro in the international market, giving up some of its gains made after the US government offered a lifeline to Detroit carmakers, as investors remained concerned over the deepening economic recession.

On the second trading day, however, the rupee managed to rebound against the euro, gaining 90 paisa for buying and 25 paisa for selling to trader at Rs108 at Rs109.15. Market showed mixed sentiments on the third trading day, when the rupee posted fresh losses of 40 paisa on the buying counter but recovered 15 paisa on the selling counter, changing hands versus the European single common currency at Rs108.40 and Rs109.00. On December 25, the trading in currency remained suspended due to public holiday on account of Qaid-e-Azam birth day. In three day trading during the week in review, the rupee shed 40 paisa on buying and 50 paisa on selling against the European single currency.

On the international front, the dollar slipped against the euro in holiday-thinned trading on December 22, as demand for the US currency slowed, with credit conditions easing further.

Improved market liquidity came as a result of the Federal Reserve’s aggressive interest rate cut last week including a slew of measures undertaken by central banks to ease the global credit crunch.

The dollar’s gains against the yen were the residual effects of the Bank of Japan’s rate cut last week, its warnings about excessive yen strength, and bad economic data in Japan.

The dollar rose above 90 yen for the first time in nearly a week after BoJ Governor said yen strength and a global slowdown may reduce Japanese exports further even after a record plunge in November.

By late New York trading, the dollar rose 0.9 per cent to 89.94 yen, while the euro gained 1.1 per cent to 125.49 yen. So far this year, Japan’s currency was up 19 per cent against the dollar and nearly 23 per cent versus the euro. The euro rose 0.3 per cent to $1.3953 but was well off its session peak of $1.4123. Sterling fell 0.5 per cent to $1.4842.

On December 23, the dollar drifted higher against the yen in thin pre-holiday trade, as investors continued to lock in profits on the Japanese currency’s recent steep gains, cautious not to push the pair lower in case Japan intervenes. Against the euro, the dollar slipped after European Central Bank

President said market participants have underestimated the importance of the steps the central bank has taken so far. By late trading in New York, the dollar was changing hands at 90.81 yen, up 0.7 per cent on the day but not far from last week’s 13-1/2-year low near 87 yen.

The euro rose was 0.2 per cent higher against the dollar at $1.3972, well off a $1.4020 session high. The euro zone currency gained following ECB President’s remarks that the central bank’s monetary policy efforts have been effective so far. He added that three-month inter-bank rates were much lower than they were in past weeks.

The euro has risen 13-14 percent since the November lows. Sterling fell 0.6 percent to $1.4739. The dollar fell 0.7 per cent to 1.0850 Swiss francs but rose sharply against the Australian and New Zealand dollars

On December 24, the dollar fell against most major currencies as data on unemployment, spending and durable goods orders reinforced the bleak outlook for the US economy in the year ahead. Trading desks were lightly staffed ahead of the Christmas holiday, confining currencies to narrow ranges. Market reaction to the economic data was subdued. In New York, the dollar was down 0.3 percent at 90.65 yen while the euro rose 0.2 per cent to $1.3983. Sterling was down 0.3 per cent at $1.4727 after a survey showed house prices in the United Kingdom would fall by 10 per cent next year.

The dollar fell 0.9 per cent to 1.0770 Swiss francs, while the New Zealand and Australian dollars both rose against the US currency

Most American and European markets were closed for Christmas holiday on December 25 However, the dollar was steady against the yen in thin holiday trade in Tokyo, after recovering some of losses made in the wake of dismal economic data that underscored the deepening recession in the United States. The euro edged down against the dollar and the yen, largely driven by dealers squaring positions amid Christmas or year-end holidays. The dollar was nearly flat at 90.45 yen from late US trade. The euro dipped 0.2 percent against the dollar to $1.3985.