Weekly Forex Market Report : Oct 23rd - Oct 27th

The rupee has faced an exorbitant pressure with buying from many domestic and foreign banks. It opened the week at 46.35/365 and ended at 46.74/75 and touched the week lowest of 46.79. Almost every day of the week saw the negative trend in the rupee and has lost almost over 40 paise. With the renewed tensions in the Middle East countries, the market watched for developments, which could have an effect on global oil prices. The movement of global equity markets could also determine fund flows from FIIs. SBI’s India Millennium Deposit which opened last Saturday and expected to garner about $5 bn has kept sentiment on the rupee from weakening substantially. The Euro too has been weakening slipping to 83 cents against the US dollar. The rupee had lost nearly seven percent against the Dollar since January. The detailed report follows:

Friday, 27th October

The Rupee ended at a new low of 46.74/75 in thin trade, dragged down by month-end Dollar demand in a thin market where supplies had dried up. The rupee record an intra-day low of 46.79 in some deals. There was no sign of central bank intervention despite the Rupee's breaching key psychological barriers and this led to companies stepping up dollar purchases. . The rupee had lost nearly seven percent against the Dollar since January. Forward premiums ended off intra-day highs on profit booking by some state-run banks. The six-month forward premium closed at 4.30 percent annualized, off 4.40 percent and compared to the previous close of 4.34 percent. The Euro dangled less than a cent above this week's record lows against the Dollar, with traders reluctant to pressure the currency ahead of U.S. growth figures.

Thursday, 26th October

Holiday

Wednesday, 25th October

The rupee ended at a record low of 46.64 / 67, down by nearly 23 paise from its previous close of 46.43 / 44 due to dollar demand outstripping supplies. The rupee opened at 46.46 / 47 and immediately lost ground as dollar demand picked up. There were a few large state run banks that mopped up dollar supplies in the market. Foreign Banks too were the buyers. The concerns remained in the markets over high global oil prices and a slow down in foreign fund flows. The Euro too has been weakening slipping to 83 cents against the US dollar.

Tuesday, 24th October

The rupee ended at a fresh low of 46.43 / 44 down by almost 7 paise from its previous close of 46.365 / 3725. The demand from state run banks led the rupee weaken in a market driven by thin supplies. The rupee opened at 46.38 / 40 and was quoted at 46.39 / 40 in early days, but heavy dollar purchases by state run banks bought on behalf of corporate clients led the rupee to slip during the day. There was also demand from custodian banks bought on behalf of foreign funds. FIIs, though they bought equities worth $69.6 mn last Friday sold around $44.1 mn. Foreign funds made net sales of $44.3 mn in September. SBI’s India Millennium Deposit which opened last Saturday and expected to garner about $5 bn has kept sentiment on the rupee from weakening substantially. Forward dollar premiums dropped on Tuesday on receiving (buy – sell swaps) by some foreign banks. A cut in the RBI’s repo rate also helped premiums bring down. The central bank cut the yields on one and three day repo by 25 basis points to 8.25%.

Monday, 23rd October

The rupee ended at a new low of 46.3650 / 3725 marginally weaker than last Friday’s close of 46.35 / 36. The rupee opened at 46.35 / 365 and slipped to an intra day low of 46.385 with a few deals at this level. There was dollar demand from a few foreign banks that were buying on behalf of foreign funds. Demand also came from a couple of state run banks, which broke the rupee down to an intra day low. However, a few banks that had built up long dollars in anticipation of demand later in the day unwounded their positions, which helped the rupee recover from its intra day low. The market watched for developments in the Middle East region, which could have an effect on global oil prices. The movement of global equity markets could also determine fund flows from FIIs. In the forward segment, premiums ended higher. The six-month forward-annualized dollar premium ended the day at 4.35% (4.21%).

K.Venu Babu