The rupee regains some strength
16 August 2004
The rupee opened at 46.25 responding to the US data on its widening negative trade balance.
US trade deficit in June widened to a record negative
(-)$ 55.8 billion, a result of decreased exports by 4.3 per cent and the imports going up by 3.3 per cent. In addition, weaker consumer confidence and the weak retail data has all caused the dollar to loose steam, especially when the Federal Reserve had been making positive statements about the economy. The market reacted to this shock and all the other currencies gained strength against the dollar.
However, the rupee did fall a bit to 46.30 levels owing to the continued demand for the dollar by oil companies. While oil is a negative drag on the rupee, the funds inflow on account of the TCS IPO will support the rupee. Oil prices rose to $46.76 per barrel, a record high. In any case the RBI is a strong support for the rupee when it is unsteady. The RBI also saw its dollar reserves rising from $1.18 billion to $1.19 billion.
The Japanese yen, which had gone up to 110.30 levels, has retraced to 111.00 mainly due to oil prices and the weak growth figures not providing any positive feel to the yen.
The pound fell against the dollar despite the dollar being weak, reacting to the Bank of England's statement that the UK economy had beenslowing down for a year or two, raising expectations of further hikes in the interest rate. Even the euro could not capitalise on the weak dollar due to the European economies not fairing well.