Weekly Forex Market Report : Dec 04th - 08th

The rupee has gained almost all the days in the week. It opened at 46.84/845 and ended at 46.7575/765, with a gain of over 9 paise in the week. The sentiment on the rupee seems to have improved slightly with global oil prices showing signs of coming off and also a stronger euro. The euro is currently at a 11 week high against the US dollar. On account of the euro's gains against the US dollar, the rupee is felt to be overvalued by about 0.5 per cent on a trade-weighted basis against about 2 per cent a few weeks earlier. The global oil prices have also fallen, as the fears over Iraq's suspension of crude oil sales eased amid reports that it was hopeful of reaching a compromise with the United Nations. The London Brent ended at $27.84 a barrel, down by $4.04 in just three trading days. A build-up in heating oil stocks in the US eased worries of a shortfall in supplies to warm American homes this winter, which contributed in larger part to the easing of oil prices. India's oil import bill is expected to touch $17.5 billion during the current financial year, assuming that oil prices remain at $30 a barrel. But this could fall if oil prices continue to rule firm at current levels. Though dollars have not been flowing into the Indian stock markets at the pace expected, foreign institutional investors have still been net buyers of Indian equities, taking advantage of the low prices at which a number of Indian stocks are quoting at. However, this being the last month of the calendar year, it is expected that they may be looking to repatriate funds to their head offices. The detailed report follows:

Friday, 8th December, 2000

The rupee ended at 46.7575/76 to the dollar, little changed from its previous close of 46.7525 / 76. The activity in the forex market on Friday was quite thin with not too many trades taking place. The rupee opened little changed from Thursday's close and was locked within a narrow band throughout the day. The sentiment on the rupee remains stable with oil prices coming off levels of $30 a barrel and also on account of the euro gaining against the dollar. The euro is currently at a 11 week high against the US dollar. On account of the euro's gains against the US dollar, the rupee is felt to be overvalued by about 0.5 per cent on a trade-weighted basis against about 2 per cent a few weeks earlier. In the forwards segment, premiums ended lower after RBI governor Bimal Jalan made a statement that the RBI was comfortable with the liquidity conditions.

Thursday, 7th December, 2000

The rupee ended steady against the US currency on late unwinding of long dollar positions by banks after early pressure threatened to cut-short a three-session brief rally at the interbank foreign exchange (forex) market.  The rupee closed at Rs.46.75/76 per dollar, unchanged from Wednesday's levels, following an early dip to intraday lows of Rs.46.78/79 due to banks taking long dollar positions in anticipation of dollar demand from corporates and importers. The rupee opened on a weak note at Rs.46.76 / 77 and traded in a range of Rs.46.75 and Rs.46.7850 in cautiously active two-way movements. Banks went long on the dollar in early trade, expecting dollar demand from corporates and importers, but in the absence of follow-up buying interest, they later unwound long dollar positions. Dollar supplies were adequate to meet the limited demand.

Wednesday, 6th December, 2000

The rupee ended marginally stronger at 46.75 / 755, against its previous close of 46.7575 / 765. Dollar sales by exporters and banks helped the rupee recover. The rupee opened at 46.73 / 74 and was quoted at 46.72 / 73 for most part of the day and appreciated to an intra-day high of 46.70. The outlook on the rupee now is positive given the fall in global oil prices. Oil prices in Asia fell to a four-month low on Wednesday.   The London Brent ended on Tuesday at $27.84 a barrel, down by $4.04 in just three trading days. A build-up in heating oil stocks in the US eased worries of a shortfall in supplies to warm American homes this winter, which contributed in larger part to the easing of oil prices. India's oil import bill is expected to touch $17.5 billion during the current financial year, assuming that oil prices remain at $30 a barrel. But this could fall if oil prices continue to rule firm at current levels. In the forwards segment of the forex market, premiums came off on receiving (buy-sell swaps) interest by state-run banks.

Tuesday, 5th December, 2000

The rupee ended sharply higher at 46.7575/765 against its previous close of 46.82/825 gaining nearly six paise. There were string dollar sales by corporates and foreign funds with little dollar demand from importers. The rupee opened at 46.79/80 and a number of corporates were selling on expectations that the rupee would further appreciate. A large diamond export house sold a substantial amount of   dollars and SPIC bought a small lot of dollars.The global oil prices have eased reducing the pressure on the rupee. Fears over Iraq's suspension of crude oil sales eased amid reports that it was hopeful of reaching a compromise with the United Nations. Foreign funds, which were net sellers of Indian equities during December have continued to buy, taking advantage of the low prices at which a number of Indian stocks are quoting at. In November, they made net purchases of $222.1 mn in Indian equities.

Monday, 4th December, 2000

The rupee ended at 46.82 / 835, stronger by about three paise from its previous close of 46.855 / 865. There was little dollar demand from corporates during the day. The rupee opened firmer than last Friday's close, at 46.84 / 85 and was quoted at 46.82 / 83 in early trades. The sentiment on the rupee seems to have improved slightly with global oil prices showing signs of coming off and also a stronger euro. The dollar has fallen to a one-month low against the euro and global oil prices have also fallen, following the Iraqi government's decision to suspend oil exports. Though dollars have not been flowing into the Indian stock markets at the pace expected, foreign institutional investors have still been net buyers of Indian equities. In November, they made net purchases of $222.1 mn in Indian equities after being net sellers in September and October. Since this is the last month of the calendar year, it is expected that they may be looking to repatriate funds to their head offices. 

K.Venu Babu