Dollar demand spurred, drains the rupee''s strength

The rupee opened at 46.34 and slipped to 46.38 against the dollar, weakening due to the dollar demand by banks and oil companies.

Oil prices rose to a record high of $46.95 a barrel yesterday. This has spurred demand for the dollar, and the RBI is expected to soon intervene and support the rupee.

Despite a number of significantly weak US economic releases, the euro closed lower against the dollar. This was surprising since the US consumer price index (CPI) and industrial production report are both very important releases. The decline of the euro could be attributed to the weak ZEW survey of economic sentiment.

In the UK, the RICS house price balance data was much lower than expected. The house price balance fell from 17 per cent to 3 per cent in July. The monetary policy is being tailored to the slow down in the economy.

The dollar continues to slide against the yen. Leading economic indicators and the coincident index both came out in line with expectations, reflecting improved economic activity. A household spending report for April-June indicates that spending increased and suggests that consumption remains strong. However, the lingering concern is still oil. The Bank of Japan's terms of trade index hints that rising oil prices could take a toll on manufacturing profits.