Weekly Forex Market Report : 13th Nov - 17th Nov

The rupee faced mixed trends in the week with buying from many domestic and foreign banks. It opened the week at 46.73/75 and ended at 46.785/795, almost a loss of over 5 paise. The one-day token bank strike drastically hit rupee trade, as there were very few participants comprising mostly of foreign and private banks. The nation-wide strike was called by the United Forum of Bank Unions (UFBU), an umbrella organization of nine unions representing a major chunk of the work force to protest the government's privatization plans. The State Bank of India (SBI), a major player in the forex spot trade, was conspicuous by its absence, along with other public sector banks. Global oil prices were firm in the week as forecasts of a US cold spell appeared to bolster an agreement by OPEC to stabilize exports for the rest of the year. Oil prices rose by nearly $1 a barrel after a decline in the already depleted heating oil stocks in the United States sent shivers through the global oil markets. Brent crude oil soared 91 cents to 33.60 a barrel while US light crude oil was trading above $35. The detailed report follows:

Friday, 17th November

The rupee ended Friday at 46.785 / 795 to the dollar, stronger by about five paise from its previous close of 46.835 / 845.  The rupee opened on a weak note, at about 46.845 / 865, little changed from its previous close but started firming up when dollar sales by state-run banks began. The dollar sales by state-run banks was expected to be at the behest of the Reserve Bank of India, and hence when they started selling, many other banks started unwinding their long dollar positions. There was moderate dollar demand from importers during the day but this was easily met by state-run banks selling dollars. Some foreign banks that act as custodians to foreign funds also sold. Foreign institutional investors (FIIs) have made net purchase of $210.8 mn in equities during November so far and this has improved sentiment on the rupee.

Thursday, 16th November

Renewed heavy dollar demand from corporates and importers drove the rupee sharply lower on Thursday following fresh concerns of rising global oil prices. In fairly active trade at the interbank foreign exchange (forex) market, the rupee closed at Rs.46.83 / 85 per dollar, steeply lower from Wednesday's closing levels of Rs.46.7550  7650. The rupee opened distinctly weak at Rs.46.79/80. Oil prices rose by nearly $1 a barrel on Wednesday after a decline in the already depleted heating oil stocks in the United States sent shivers through the global oil markets. Brent crude oil soared 91 cents to 33.60 a barrel while US light crude oil was trading above $35. In cross-currency trades, the rupee maintained its strength against the Britain sterling.  Resuming on a firm footing against the single European currency at Rs.40.17/19 per euro, the rupee later closed at Rs.40.20 / 22 per euro, little changed from overnight closing levels of Rs.40.19 / 21.

Wednesday, 15th November, 2000

The rupee firmed up on dollar sales by foreign banks in an extremely thin interbank foreign exchange (forex) market, severely affected by the nation-wide strike called by bank unions to protest privatization of public sector banks. The Indian unit ended at Rs.46.7550 / 7650 per dollar, a moderate gain of three paise from overnight closing levels of Rs.46.7850 / 7900 after trading in a band of Rs.46.7400 and Rs.46.8100. The one-day token bank strike drastically hit rupee trade, as there were very few participants comprising mostly of foreign and private banks. The nation-wide strike was called by the United Forum of Bank Unions (UFBU), an umbrella organization of nine unions representing a major chunk of the work force to protest the government's privatization plans. The State Bank of India (SBI), a major player in the forex spot trade, was conspicuous by its absence, along with other public sector banks that kept activity low. Initially, the rupee came under pressure and fell to Rs.46.81 / 82, but later rallied smartly to end with gains that were exaggerated in an extremely shallow market. Meanwhile, RBI fixed the reference rate at Rs.46.75 per dollar against Rs.46.78 fixed on Tuesday.

Tuesday, 14th November, 2000

The rupee ended on Tuesday marginally weaker on import demand sparked by worries over firm global oil prices. The rupee ended at 46.7875 / 795, weaker by about three paise from its previous close of 46.7575 / 7625. Global oil prices were firm on Tuesday as forecasts of a US cold spell appeared to bolster an agreement by OPEC on Monday to stabilize exports for the rest of the year. Some corporates hedged positions due to the high oil prices. But supplies from state-run banks capped the rupee fall beyond 46.8. The dollar sales by banks offering custodial services, which are normally on behalf of foreign funds, were low on Tuesday. In the forward segment, near term premiums eased on improved liquidity in the call money market. The six-month forward premium ended at 4.18 per cent annualized compared to the previous close of 4.24 per cent.

Monday, 13th November, 2000

The rupee ended on Monday at 46.7575 / 7625 to the dollar, weaker by about three paise from its previous close of 46.75 / 735.  The rupee opened at 46.73 / 75 and was quoted at 46.73 / 74 in early trades and was in a range of two paise for most part of the day. There were good dollar sales by few state run banks and foreign banks, which were custodians to foreign institutional investors in the country. Foreign funds have turned buyers in the Indian stock markets and have made net purchases of $214-million during the month so far. The sudden demand for the dollar towards the close of trades caused the rupee to close weaker. In the forward segment of the forex market, premiums ended little changed from their previous close. The six-month forward annualized dollar premium ended the day at 4.24 per cent (90/92 paise) against its previous close of 4.23 per cent, while the 12-month premium ended at 4.20 per cent (187/189 per cent) against last Friday's close of 4.17 per cent.

K.Venu Babu