Rupee recovers 40 paisa against dollar
However, firmness prevailed on the second trading day of the week as the rupee held its overnight levels unchanged trading against the dollar at Rs79.10 and Rs79.15 due to sufficient dollar supply to meet rising demand on February 3. The rupee continued its downslide against the dollar on the third trading day, when it lost three paisa on buying counter and two paisa on selling counter to trade at Rs79.13 and Rs79.17 amid dull trading on February 4.
Trading in inter-bank market on February 5 remained suspended on account of banks closure due to public holiday announced by the federal government on the occasion of Kashmir Solidarity Day. When trading resumed after a day break on February 6, the rupee/dollar parity posted fresh losses due to strong dollar demand in the market. However, the rupee resisted sharp fall against the dollar due to better dollar supplies, losing five paisa at Rs79.18 and Rs79.22. During the entire week, the rupee suffered a cumulative decline of 9 paisa against the dollar in the inter bank market.
In the open market, the rupee/dollar parity remained firm throughout the week. After closing previous week at Rs79.50 and Rs79.80, the rupee commenced this week on a positive note, gaining 10 paisa against the dollar, which traded at Rs79.40 and Rs79.70 on February 2. The rupee further extended its overnight firmness against the dollar on February 3, when it managed to sharply recovered 30 paisa on the buying counter and 40 paisa on the selling counter to change hands against the dollar at Rs79.10 and Rs79.30.
The upward rising trend in the rupee/dollar parity persisted in the open market for the third consecutive day on February 4, as the rupee posted fresh gains of 10 paisa on the buying counter but remained unchanged on the selling counter to trade at Rs79.00 and Rs79.30. The market remained closed on February 5, when currency trading remained suspended for the whole day, being Kashmir Day holiday.
When trading resumed in the local currency market after a day break on February 6, the rupee suffered first decline this week, losing 10 paisa against the dollar on the buying counter. However, it managed to hold its overnight rate showing no change on the selling counter to close the week at Rs79.10 and Rs79.30. During the week in review, the rupee in the open market managed to recover 40 paisa against the dollar on the buying counter and another 50 paisa on the selling counter.
Against the European single common currency, the rupee displayed slight strength this week, gaining 50 paisa on the opening day of the week. It traded at Rs101.50 and Rs103.50 on February 2, after closing last week at Rs102.00 and Rs104.00. The rupee further extended gains versus euro, rising by 20 paisa to trade at Rs101.30 and Rs103.30 on February 3.
On February 4, the rupee failed to hold its firmness against the euro and sharply lost 170 paisa on the buying counter. However it managed to restrict decline on the selling counter to 70 paisa and traded at Rs103.00 and Rs104.00. Trading remained suspended on February 5, being public holiday. On February 6, the rupee rebounded against the euro as it was able to recover 100 paisa to change hands at previous weekend’s levels of Rs102 and Rs104.
On the international front, the dollar fell against the yen on the week’s opening day as investors remained wary of risk amid fears of more woes in the banking sector and a deepening recession around the world. The euro gained versus the dollar on expectations the European Central Bank will keep interest rates steady later this week and maintain the currency’s yield appeal. A brief rebound in US equities also lent support to the currency.
In late trading in New York, the euro was 0.5 per cent higher at $1.2848, after rising to as high as $1.2898, according to Reuters data. The dollar fell 0.4 per cent to 89.59 yen. Sterling was down 1.6 per cent at $1.4274, swiftly reversing last week’s strong gains, when sterling enjoyed its biggest weekly percentage gains against the dollar in over 20 years.
On January 3, the currency market continued to take its cue from equity trading. US stocks extended their advance in late trading, boosting risk sentiment and easing demand for the dollar and the yen, which are seen as safer places to park money in times of stress. An announcement by the Bank of Japan of a plan to buy up to 1 trillion yen ($11 billion) in listed shares held by Japanese banks and a deep interest rate cut in Australia also helped boost sentiment earlier.
The euro was up 1.5 per cent versus the dollar at $1.3038, after rising as high as $1.3056, according to Reuters data. The dollar fell 0.2 per cent to 89.29 yen. Euro/dollar has been trading on the back of risk aversion and sentiment in the past couple of days. The euro could trade as high as $1.3250 in coming weeks. Sterling erased early losses versus the dollar to rally sharply with sentiment boosted by rising stock markets after US housing data showed buyers were prepared to take advantage of lower interest rates.
On February 4, the dollar rose across the board as falling stock prices and concerns over possible delays in the government’s stimulus package boosted the greenback’s safe-haven appeal. The euro sank against both the dollar and the yen, weighed by news of a downgrade of Russia’s sovereign credit rating.
In late New York trading, the dollar rose 0.8 per cent to 85.697 against a basket of currencies. The euro fell 1.4 percent to $1.2848 and 1.3 per cent to 114.87 yen. The dollar rose 0.2 per cent to 89.41 yen. Sterling was up 0.5 per cent against the dollar on the day at $1.4554, and traded at a two-week high of $1.4573. Earlier in the global session it was as low as $1.4326.
On February 5, the dollar surged to its highest against the yen in nearly a month after a rally on Wall Street revived investors’ appetite for risk. The euro fell versus the dollar, weighed down by comments from the European Central Bank chief that the euro zone was undergoing an extended downturn. The currency market continued to take its cue from US stocks, which rallied amid talk Washington’s rescue plan for banks may include suspension of a key accounting rule. That eased demand for the yen, which tends to rise when risk aversion spikes and investors unwind riskier investments.
In late trading in New York, the dollar was 1.9 per cent higher at 91.13 yen. It traded as high as 92.23 yen, the highest since January 8. The euro was down 0.3 per cent at $1.2787. It recovered from a session low of $1.2760 as Wall Street advanced. The pound also jumped against the dollar after the Bank of England cut borrowing costs to a record low - aimed at blunting the impact of a deep recession. The pound touched a two-week high of $1.4662, up around a cent and a half from just before the decision.
At the close of the week on February 5, the dollar slipped against the yen in cautious trade before key jobs data that is expected to paint an even bleaker picture of the US labour market. The US currency hit a one-month high against the yen on February 4 on a rally in US shares led by hopes that the government rescue plan for banks might include suspension of a key accounting rule, thawing investors’ aversion to risk. The dollar slipped 0.3 per cent to 90.85 yen from late US trade on February 4, when the US currency hit a one-month high above 92 yen.
The euro was down 0.1 per cent at $1.2772. Sterling steadied at $1.4603 after having risen on February 4 when the Bank of England cut interest rates to a record low of one per cent, which was seen helping the faltering economy. The dollar, a major beneficiary of fears over a rapidly worsening global economic backdrop, turned lower against the pound and euro after the US Labour Department said employers slashed 598,000 jobs in January, the deepest cut in payrolls in 34 years.