Weekly Forex Market Report : Jan 01st - 05th

The rupee has projected a weak trend through out the week. It opened at 46.66/67 and ended at 46.7100/7150. Closure of major world markets on account of new year aided the subdued trend in the start of week. There were no cash transactions owing to the closure of New York markets. RBI fixed the reference rate at 46.66 as against 46.75 fixed on the last working day on Dec 29th. Dollar supplies remained thin and there were hardly any inflows with the heavy dollar demand, which aggravated the situation. Meanwhile sentiment on the rupee was partly affected by the Institute of Economic Growth (IEG) report that said the rupee is expected to break yet another psychological barrier of 47 per dollar in few months. The rupee had depreciated by around 6-1/2 paise in the last four consecutive trading sessions due to sustained dollar demand. The detailed report follows:

Friday, 5th January, 2001

The rupee staged a modest rally on a late dollar sell off by the banks after coming under early pressure due to steady demand for dollars from corporates and importers. The rupee closed at 46.7100/7150 slightly higher than previous close of 46.7225/7275 after it touched the day's peak of 46.69/70. The rupee opened softer at 46.72/73 and dipped to an intra day low of 46.7450/7550. Banks unwound long dollar positions and helped the rupee to bounce back smartly to 46.69/70 before settling at 46.7100/7150 at the close. The rupee had depreciated by around 6-1/2 paise in the last four consecutive trading sessions due to sustained dollar demand.

Thursday, 4th January, 2001

The rupee continued to decline with the demand from the corporates and importers but ended off intra day lows in fairly active trade. Opening around 46.70/72, the dollar dipped to intra day low of 46.74/75 before settling at 46.7225/7275, a loss of 3/4 passe from the overnight closing of 46.7050/7100. It had depreciated by 4-1/2 paise in the earlier two consecutive sessions. After resuming on a weak note at 46.70/72 due to a weekend differential, the rupee later dipped to intra day low of 46.74/75 on a rush to cover dollar positions by the banks, anticipating demand for dollars from corporates and importers. However, with the lack of adequate demand for dollars, the banks later liquidated part of their long positions to enable the rupee to partly bounce back at the close. There was stiff resistance around 46.74 level which induced banks to unwind long dollar positions. Banks and corporates sold around these levels and the spot rupee recovered marginally from intra day lows.  

Wednesday, 3rd January, 2001

The rupee lost ground on renewed light corporate dollar demand in a lackluster and thin trade at the forex market. The rupee ended at 46.7050/7100, a one paise fall from overnight dollar value. The short-covering by banks threatened to further aggravate the fall of the rupee in the deals when it dipped to a low of 46.71/72. However, dollar supplies improved to cushion the rupee's fall. There was a mild demand for dollars. A large state run bank offered dollars on a shallow market. RBI fixed the reference rate at 46.7 per dollar as against 46.69 on Tuesday.  

Tuesday, 2nd January, 2001

The rupee weakened on fresh pent-up dollar demand from importers and corporates in fairly active trade at the forex market. Opening in a soft note at Rs.46.67/68, the rupee dipped to an intra day low of 46.70/71 before settling at the close at 46.6950/7000, sharply lower from Monday's close of 46.66/67. Bunching of dollar demand from importers and corporates after a long weekend amidst negligible supplies following market closure for New Year was the main factor the steep fall in the rupee value. Dollars supplies remained thin and there were hardly any inflows with the heavy dollar demand, which aggravated the situation. Meanwhile sentiment on the rupee was partly affected by the Institute of Economic Growth (IEG) report that said the rupee is expected to break yet another psychological barrier of 47 per dollar in few months. In its monthly monitor December 2000, IEG said that it expected the exchange rate to hover around 47.15, assuming no further infusion of IMD.  

Monday, 01st January, 2001

The rupee extended weekend gains on scattered dollar scales by banks and ended slightly higher in a shallow and dull traded market. The rupee opened and closed at the same levels of Rs.46.66/67, a further one paise gain from last Friday's close of 46.67/68. It was confined to a tight band of 46.655 and 46.67 in muted business. Rupee- dollar outright spot dealings remained quiet and rangebound due to lack of market moving factors. Closure of major world markets on account of new year aided the subdued trend. There were no cash transactions owing to the closure of New York markets. Meanwhile RBI fixed the reference rate at 46.66 as against 46.75 fixed on the last working day on Dec 29th. The reference rate is based on 12-noon rates of a few selected banks in Mumbai. The SDR rupee rate is calculated on this rate.

K.Venu Babu