Divergent trends in currency market


Divergent trends in currency market IN international trade, the dollar, which had rallied around 3pc since the end of September, strengthened to its highest level against most major rivals, in more than eight months, towards the weekend; with investors waiting for the European Central Bank’s weekend meeting decision on its bond purchase program and the US Federal Reserve’s decision on the December rate hike.

The euro fell against the US dollar to its lowest level since mid-March towards the close of the week, dropping 0.9pc against the dollar over the week.

During the week, sterling also fell against the dollar after the president of the European Council reportedly stated that EU leaders would not engage in negotiations on Britain’s exit from the bloc at Prime Minister Theresa May’s first summit in Brussels.

The euro fell against the US dollar to its lowest level since mid-March towards the close of the week

However, it touched its highest in almost two weeks against the euro, holding onto its biggest one-day gain in months, riding out another round of headlines around Brexit negotiations and the government’s attitude to the central bank.

The local currency market witnessed divergent trends last week.

Comfortable reserves position and sufficient capital inflows, besides the dollar weakness against major currencies overseas during the most part of the week, restricted the rupee fall in the domestic market. Dollar selling by exporters and banks in the week also supported the rupee.

Last week on the interbank market, the rupee/dollar parity suffered mild losses.

The rupee slipped close to almost a month low at Rs104.80 and Rs104.82 at the close of the week after shedding five-paisa against the dollar.

During the week, the dollar gained 17paisa on the buying counter and 18paisa on the selling counter while losing ten-paisa on respective counters in two sessions.

On week over week basis, the dollar gained up to eight-paisa against the rupee on the interbank market.

Dollar weakness against other currencies overseas on the unexpected fall in a US manufacturing index, besides continued dollar selling by exporters and banks in the local market, restricted the fall in rupee value.

In the open market, the rupee/dollar parity moved both ways last week. Investors were slightly risk averse as politics hits domestic stock market in the week’s early trading sessions, avoiding risky bets ahead of an expected standoff between the government and opposition on Panama papers issue.

The dollar bounced back against the rupee, retrieving its one-and-a half month’s peak of Rs105.50 and Rs105.70 at the close of the week after the rupee failed to hold its firmness and shed ten-paisa in the last trading session.

During the week in review, the rupee still managed to appreciate by 25paisa against the dollar in the open market.

Against euro, the rupee last week was seen under slight pressure, trading range-bound between the high of Rs115.00/116.00 and low of Rs116.00/117.50 while the differential between the buying and selling rates remained fluctuated in 100paisa and 200paisa range.

The rupee rebounded sharply against euro after it managed to post 60paisa gain on the buying counter and further 110paisa gain on the selling counter, hitting its highest level in 15 weeks at Rs115.00 and Rs116.00.

On week on week basis, the euro lost 30paisa on the buying counter and 80paisa on the selling counter against the rupee.

Source: http://www.dawn.com/news/1291809/divergent-trends-in-currency-market

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