In the local currency market, the rupee this week mostly maintained a stable trend versus the dollar and euro.

Trading in currencies was slow as market players were in holiday mood in the week that was shortened by two days on account of Moharram. In the inter-bank market, firmness prevailed on January 5 as the rupee held its week-end levels unchanged at Rs79.15 and Rs79.20 despite dollars’ rising demand by the importers.

On January 6, however, the rupee inched up with slight gain against the dollar, gaining five paisa and changing hands at Rs79.10 and Rs79.15. There was strong demand for dollars ahead of Ashura holidays but the rupee was able to retain its gain due to easy supply of dollars.

Inter-bank trading remained suspended for two days on account of Ashura on the third and fourth trading day of the week in review. Firm trend persisted on January 9. The market re-opened on a positive note after two day break on account of Moharram holidays. Despite strong demand for dollars, the rupee managed to gain eight paisa against the dollar, which traded at Rs79.02 and Rs79.07 at day close. During this week, the rupee in the inter-bank market gained 13 paisa against the dollar on cumulative basis. However, it was still lower by nearly 21% over a year earlier level when dollar was at Rs62.50 and Rs62.54.

In the open market, the rupee maintained a stable trend, holding its week-end levels against the dollar unchanged at Rs79.00 and Rs79.50 on the first trading day of the week in review. The rupee traded unchanged against the dollar for the second consecutive day amid slow trading activity on January 6. The Market was closed on January 7 and January 8 on account of Mohorram holidays.

On January 9, the rupee was stable in the open market, as it maintained its pre-holidays levels against dollar to trade at Rs79 and Rs79.50. During the week in review, the rupee in the open market did not see any change in its value against the dollar. It, however, shed Rs16.70 against the dollar as compared to its level attained 12 months ago, when dollar traded at Rs62.30 and Rs62.40.

Versus the European single common currency, the rupee displayed extended firmness, gaining 15 paisa on the buying counter and another 50 paisa on the selling counter to trade at Rs107.90 and Rs108.50 on the opening day of the week after ending previous week at Rs108.05 and Rs109.00. The upward rising trend in the rupee persisted against euro on the second trading day, as the rupee managed to post fresh gains of upto 150 paisa, trading at Rs106.50 and Rs107.00 on January 6. Trading in currencies remained suspended on January 7 And January 8, being public holidays announced by the government on account of Ashora Mohorram.

When trading resumed on January 9, the rupee came under pressure as it failed to hold its firmness, shedding 20 paisa against the European single common currency on the buying counter and 100 paisa on the selling counter. At the close of the day, the euro traded at Rs106.70 and Rs108.00. This week, the rupee on cumulative basis recovered Rs1.35 on the buying counter and Rs1.00 on the selling counter against the European single common currency. It, however, lost Rs17.07 over the past 12 months, when euro had traded at Rs90.93 and Rs91.03

On the international front, the dollar posted sharp gains against the euro and yen on the week’s opening day. The yen fell to more than three-week lows against the dollar amid improved risk appetite, with bargain prices and hopes for a global economic recovery this year prompting stock market gains in Europe and Japan, while euro hit three-week lows against the dollar, with weaker-than-expected inflation data in Italy and Spain and tax cuts in Germany seen raising pressure on the European Central Bank to cut interest rates further.

In late New York trading, the euro weakened 2.1 percent on the day to $1.3587, after earlier touching $1.3548 - its lowest since mid-December, according to Reuters data. Against the yen, the dollar climbed to 93.56 yen, its highest since December 8. It last traded at 93.29 yen, up 1.2 percent. The Japanese currency surged nearly 19 percent last year against the dollar as investors sold off risky assets financed with the yen’s cheap rates. Sterling was pressured against the dollar on expectations the Bank of England will cut interest rates aggressively again later this week.

On January 6, the dollar rose to a three-week high against the euro, helped by persistent signs of economic weakness in the euro zone that may force its central bank to slash interest rates further. The euro fell broadly after a drop in euro zone inflation boosted expectations the European Central Bank will continue to cut interest rates, which would likely diminish the allure of the euro zone currency against the dollar.

In late New York trading, the euro eased 0.6 per cent to $1.3519, after having fallen as low as $1.3311, its weakest since December 12. The dollar climbed as high as 94.63 yen, its highest since December 1. It last traded at 93.76 yen, up 0.4 per cent. Analysts cited speculation that Japanese investors are renewing their foreign investments this year, which should hurt the yen. Sterling held down against the dollar as data underlined the UK’s economic vulnerability. But weak UK economic data kept dire fundamentals at the forefront of investors’ minds, with the pound down 0.5 percent on the day at $1.4613.

On January 7, the dollar edged up against the euro to hover near a one-month high hit the previous day. Persistent signs of economic weakness in the euro zone that may force its central bank to cut interest rates further helped pressure the euro against the dollar, as well as the yen. The yen fell towards a one-month low against the dollar. It gave up earlier gains on a newspaper report that Japan’s government will seek to scrap capital gains taxes for foreigners investing in Japanese companies through funds, which could encourage capital flows into the country.

The dollar drew strength from early 2009 gains in Wall Street shares, which also helped the currency market to ignore dismal economic data including previous day’s figures showing a steep drop in factory orders and pending home sales in November. The euro dropped 0.1 percent to $1.3520, after having tuzone inflation boosted expectations the European Central Bank will continue to cut interest rates, which would likely reduce the appeal of the euro zone currency against the dollar and other major currencies.

The dollar was steady at 93.69 yen, rebounding from the day’s low of 93.20 yen and moving towards a one-month high of 94.65 yen touched the previous day on EBS. Sterling climbed more than 2.2 percent to $1.5285, also its highest since mid-December. The dollar came under selling pressure after a weaker-than-expected reading of US private sector jobs. The single currency clawed back some of its major losses against sterling to gain as high as 91.75 pence but stayed some way off record highs scored above 98 pence in late December.

On January 8, the dollar fell against a basket of currencies ahead of a government report expected to show the US economy lost more than half a million jobs in December for the second month in a row. The Japanese yen traded broadly higher as falling global stocks and weak sales at top US retailer Wal-Mart tempered the market’s appetite for risk and heightened fears about the global economic outlook.

In late trading in New York, the dollar was down 1.6 percent at 91.16 yen, extending losses after Wal-Mart Stores Inc - the world’s largest retailer - posted weaker-than-expected December sales and cut its profit forecast.

The dollar had rallied in the first few days of 2009, buoyed by a planned US stimulus package that many hope would help pull the economy out of recession. But that optimism proved short-lived as fresh US data and dismal earnings figures reignited fears of a prolonged slowdown. The euro rose 0.6 percent to $1.3718 after falling to a session low of $1.3535, according to Reuters data. Sterling, meanwhile, bounced to three-week highs against the dollar and euro after the Bank of England met market expectations with a 50-basis-point interest rate cut to 1.5 per cent. The pound rose as high as $1.5372. It last traded at $1.5242, up 0.9 per cent.

At the close of the week on January 9, the dollar edged down against the yen on caution ahead of US employment data. Trading in Asia was subdued as the markets tried anticipating to what extent downbeat US employment figures were priced in. In Tokyo, the dollar slipped 0.1 per cent from late US trade the previous day to 91.13 yen, after rebounding as high as 91.59 yen earlier. The dollar had fallen as low as 90.83 yen after having hit a one-month high of 94.65 yen earlier in the week. The euro fell 0.3 percent to $1.3666. In London, sterling bounced to three-week highs versus the dollar, rising as high as $1.5290.