IN THE local currency market, the rupee continued to show divergent trends against the dollar and euro last week. Analysts say there is pressure on the rupee.
Over the past seven months, both exports and workers’ remittances have reportedly declined and some analysts foresee 4pc devaluation against the dollar in the months ahead. In 2016 so far, the rupee has depreciated against the dollar by 0.2pc and by 1.7pc against euro. Subdued external inflows last week exerted a downward pressure on the local currency market as well as foreign exchange rate.
On the interbank market, the rupee/dollar parity, though under slight pressure, showed slight variation last week as it hovered in narrow ranges between the Rs104.58/60 and Rs104.72/74.
The dollar extended gains against a basket of currencies as a stronger-than-anticipated jobs report for July raised expectations
Meanwhile, the dollar in overseas trade extended gains against a basket of currencies as a stronger-than-anticipated jobs report for July raised expectations that the Federal Reserve is closer to raising interest rates. On the back of the strong dollar, demand for dollar from importers mounted for making payments towards the end-quarter. Consequently, the market witnessed some volatility in dollar activity that weakened the rupee in the local market.
During the week in review, the dollar gained up to 18paisa against the rupee in three sessions and lost 15paisa in two sessions. On week on week basis, the rupee lost three paisa against the dollar in the open market, bringing cumulative loss in the first two weeks of August to almost 20paisa against the dollar.
In the open market the rupee/dollar parity recorded minor changes and traded almost flat last week. Commencing the week on stable note, the dollar traded firm against the rupee in the rest of the week following a surge in dollar demand that exerted downward pressure on the rupee in the open market.
Chart by RA
The rupee closed the week flat at Rs106.10 and Rs106.30 as it did not show any change against euro for the fourth successive day in the fifth trading session. In overseas trade, however, Sterling hit a three-year low against the euro and a one-month trough against the dollar on expectations that poor economic data will lead the Bank of England to ease monetary policy again in the coming months. During the week, the dollar in the open market gained ten-paisa against the rupee on week on week basis.
Against euro, the rupee fluctuated and moved both ways in narrow ranges last week.
The rupee finally ended the week on a negative note. In the last trading session, it shed ten-paisa against euro before slipping to Rs118.00 and Rs119.00. During the week in review, the rupee posted a loss of Rs1.65 in three sessions and at the same time it managed to recover 65paisa in two sessions. On week on week basis, euro still gained 100paisa against the rupee. The rupee has depreciated against the dollar by 0.33pc in the first two weeks of August so far.