Rupee weakens on dollar demand
The rupee in the inter bank market lost 30 paisa against the dollar on the buying counter and another 24 paisa on the selling counter and traded at Rs66.95 and Rs66.99 on June 16, against previous week close of Rs66.65 and Rs66.75. However, the rupee managed to recover overnight losses, gaining five paisa on buying and four paisa on selling due to some improvement in dollar supplies on June 17, when the dollar was seen changing hands at Rs66.90 and Rs66.95.
On June 18, the rupee again weakened against the dollar. The rupee failed to hold its overnight firmness versus the American currency amid rising dollar demand and shed five to trade at Rs66.95 and Rs67.00. The rupee continued its falling trend on June19, posting fresh losses of 45 paisa on buying and 50 paisa on selling due to sharp increase in importers demand for dollars, which traded at Rs67.40 and
Rs67.50. The rupee was able to reverse its overnight falling trend against the dollar on June 20, gaining five paisa for buying and 10 paisa for selling to trade at Rs67.35 and Rs67.40. This brings cumulative decline in rupee value against the dollar in the inter bank market this week to around 75 paisa amid fluctuations.
In the open market, the rupee/dollar parity commenced the week on a negative note. The rupee suffered a sharp decline in relation to dollar, losing 20 paisa and trading at Rs67.85 and Rs68.10 on June 16, after closing previous week at Rs67.65 and Rs67.90. The falling trend persisted on the open market on June 17 as strong demand for dollar continued to exert downward pressure on the rupee. The rupee posted fresh losses of 30 paisa for buying and 25 paisa for selling with dollar changing hands at Rs68.15 and Rs68.35. On June 18, the rupee sustained its overnight level against dollar on the buying counter, while gaining 10 paisa on the selling counter to trade at Rs68.15 and Rs68.25.
On the following day, the rupee failed to hold its firmness versus the dollar making fresh losses of 20 paisa on buying and another 25 paisa on selling as it could not resist demand pressure, trading at Rs68.35 and Rs68.50 on June 19. However, the rupee managed to assumed upward trend on June 20 recovering from overnight losses against the dollar. It gained 25 paisa on the buying counter and 15 paisa on the selling counter, changing hands versus the dollar at Rs68.10 and Rs68.35. This week, the rupee in the open market lost 45 paisa versus the US currency.
Versus the European common currency the rupee, however, rose by 15 paisa and traded at Rs104.25 and Rs104.35 on the week’s opening day after ending last week at Rs104.40 and Rs104.50. The rupee weakness persisted on the second trading day, when it further lost Rs1.15, changing hands at Rs105.40 and Rs105.50. The rupee however, managed to recover from overnight weakness over the euro on the third trading day, gaining 15 paisa to trade at 105.25 and Rs105.35 on June 18.
On June 19, the rupee extended its weakness and shed 30 paisa to trade at Rs105.55 and Rs105.65. On June 20, the rupee extended gains versus euro, rising 25 paisa as the dollar managed to recover its ground in terms of the of world leading currencies. It traded at 105.30 and Rs105.40 against the European single common currency. During the week in review, the rupee in the inter bank market lost 90 paisa against the euro.
On the international front, the dollar fell against the euro on June 16, halting a three-session winning streak, as record euro-zone inflation supported expectations of a European Central Bank interest rate hike next month. The euro earlier raced to a session high of $1.5517, pushing further away from last weekend’s one-month low around $1.5300, according to Reuters data. In late trading in New York, the euro zone currency last traded at $1.5478, up 0.6 per cent on the day. The euro earlier climbed to a session high of 167.68 yen, its highest level since October. Sterling gained one per cent versus a broadly weaker dollar to $1.9666.
On June 17, the dollar fell against the euro as US housing starts plunged to their lowest level in more than 17 years in May, casting more doubt over an anticipated early Federal Reserve interest rate increase. But losses were limited, with traders also paring expectations of tighter monetary policy in the euro zone after ECB Executive Board member said a quarter-point hike should bring inflation below its target. The euro rose earlier to $1.5551 and in late trading in New York it was last at $1.5517, up 0.3 per cent on the day.
Against the yen, the dollar fell 0.2 per cent to 107.94 yen. Sterling fell to near a one-month low after the Bank of England said it was uncertain about the path to take to get British inflation back on track following higher than expected inflation data. It traded at $1.9492, 0.7 per cent lower on the day. It initially hit a one-week high after the CPI figures, before reversing those gains to fall to a session low of $1.9470.
On June 18, the dollar edged lower as investors adjusted their interest rate outlooks for the United States and the euro zone after conflicting economic data and monetary authorities toned down threats of tighter policy. Traders scrambled to revise downward their expectations of an August Federal Reserve interest rate rise after data this week showed US housing starts plunged to a 17-year low in May. US short-term interest rate futures are pricing in a roughly 48 percent chance of a 25 basis points Fed rate increase in August, down from 90 per cent earlier in the week.
In late trade euro edged higher or 0.1 per cent to $1.5530 after earlier slipping to $1.5462. It remained confined to a $1.53-1.5550 range in the absence of fresh economic data. Remarks by San Francisco Federal Reserve Bank President suggesting the volatility in financial markets was showing signs of easing gave the market little impetus. The dollar was 0.1 per cent lower at 107.80 yen. Sterling was pressured against the dollar after minutes from the Bank of England’s last policy meeting showed members voted 8-1 to leave interest rates on hold, dousing the possibility of a near-term rate hike. It was flat against the dollar at $1.9555.
On June 19, the dollar rose versus the euro helped by a sharp drop in crude oil prices and a surge in British retail sales that caused traders to offload the European single currency to buy sterling. May’s surprise jump in retail sales raised expectations the Bank of England will raise interest rates, helping to drive the pound to its highest level in over a week against the dollar and spark a rally versus the euro. The euro fell as low as $1.5467 in overnight trade. It recovered some losses as data showed factory activity in the US Mid-Atlantic region slowed further in June.
High oil prices have fanned inflation pressures and concerns about their impact on global growth. In late New York trading, the dollar edged down 0.1 percent to 107.69 yen pulling further away from a four-month high of 108.59 yen struck earlier this week. The euro was down 0.2 per cent against the dollar on the day. Against the Swiss franc, the dollar rose 0.9 per cent to 1.0459 francs, reversing earlier losses ahead of the SNB decision. Sterling rallied to $1.9726 after the sales data came out, hitting its highest level since June 10. It was trading at $1.9695, up half a percent on the day.
At the close of the week on June 20, the dollar dipped against the yen as a fall in Tokyo share prices tempered demand for risky carry trades. The dollar retreated against the yen and euro earlier this week on renewed concerns about the US economy. Such worries were stoked by weak economic indicators, including data that showed housing starts plunged to a 17-year low. But the dollar gained some reprieve on June 19, as oil plunged nearly $5 and traders said the currency could see more gains, especially against the euro, if oil prices decline further.
The dollar dipped around 0.1 per cent from late US trading on the previous day to 107.92 yen It had edged down to 107.85 yen on trading platform EBS earlier, although that was still within sight of a four-month high of 108.59 yen hit on June 16. The Canadian dollar was supported after Bank of Canada said an unprecedented rise in commodity prices required a “relentless focus on inflation”. The dollar edged down 0.1 per cent to C$1.0146. The pound was up 0.1 per cent against a broadly weaker dollar at $1.9724 after hitting its highest in over a week at $1.9746 the previous day.