Rupee vs Dollar, Indian Sensex, and Gold weekend update

With the global economy undergoing a risk equation rebalancing across asset classes, as reflected by a directionless trend over equity markets worldwide, gold is expected to gain some sheen in the days to come.

“Gold initially goes down with all other asset classes when there is a sell off. But the yellow metal will be the one to bounce back first,” said T Gnanasekar, director of Commtrendz Risk Management Services. He expects gold to hit $850 per ounce by the end of the calendar year.

“The underlying factors look favourable to gold. Though gold prices may see lower levels of around $640 per ounce in the near term, they are expected to hit the $850-levels by December this year.” Gold closed at $673 per ounce on the Comex.

A stronger Yen (a cheap source of borrowed funds at 0.5 per cent), which along with defaults in sub-prime loans contributed to a declining credit risk appetite in the US, has sparked a sell off in securities across the globe.

“It is essentially the appreciation risk. For somebody who has borrowed money from Japan to invest in other countries, appreciation of yen negatively affects profits,” said DK Joshi, principal economist of Crisil.

Corporate credit spreads in the US (the difference between the yield of corporate bonds and that on a comparable maturity treasury), have already widened, indicating a drop in risk appetite.

Investors and hedge funds have used the yen carry trade to drive up the US credit and equity markets in the recent past. Now, with investors across the globe turning risk averse, positions built up in various securities are expected to recoil, thus resulting in a rush of funds into gold, the safest investment haven under adverse economic conditions.

Further, if the rupee weakens against the dollar, domestic gold prices will get an automatic fillip by the same magnitude.

“A stronger rupee reduces the price of landed gold, more or less by the extent the currency is overvalued. Now, it has to get adjusted somewhere. This means that any person who buys gold now stands to generate returns to the extent the rupee weakens by,” said an analyst with a domestic brokerage.

At 3:20 pm on Saturday, gold for December delivery was trading at Rs 9019 per 10 gram, up Rs 2 from the previous day’s closing price.

Rupee / US Dollar Forex Currency News, Gold in India, and The Sensex index on the Bombay Stock Exchange (BSE).
Euro / Rupee and Yen / Rupee.
The local currency market witnessed a mixed trend throughout the past week. However, the national currency closed on a strong note against the US dollar.

The rupee showed recovery against the US dollar in open market dealings in the past week. Continued diminishing trend was seen in the demand for dollar and people�s interest is moving towards the euro and the British pound against the dollar.

The dollar commenced the week�s trading at Rs61, lost 10 paisa and changed hands at Rs60.90 at the close of markets on Saturday. Thus, the local currency ended the week on a positive note versus the greenback in open market dealings, stated Ayaz Messam, forex analyst at KKI (Pvt) Ltd.

The national currency depreciated by 3 paisa against the greenback in open market dealings on Monday. The dollar started trading at Rs61, went up and changed hands at Rs61.3 at close of markets.

The rupee recovered 3 paisa against the dollar in open market dealings on Tuesday. The US dollar started trading at Rs61, shed mere grounds and changed hands at Rs60.97 at close of markets on Tuesday.

The rupee continues to make a comeback versus dollar in the open market and recovered another 5 paisa against the dollar. It started trading at Rs60.97, shed more grounds and changed hands at Rs60.92 at close of markets on Wednesday.

On Thursday, the national currency continued its gaining trend against the US dollar and was up by 2 paisa versus dollar in open market dealings. The US dollar started trading at Rs60.92, shed mere grounds and changed hands at Rs60.90 at close of markets.

The rupee did not show any change versus the dollar in the open market on Friday. The US dollar started trading at Rs60.90, remained motionless and stood unchanged at close of markets on Friday.

In interbank dealings, the local currency continued to stand in the positive zone and gained 4 paisa against the greenback.

The national currency gained 1 paisa against the dollar in the interbank market on Monday. The US dollar started trading at Rs60.39, shed grounds and changed hands at Rs60.38 at close of markets on Monday.

The rupee showed no change against greenback in the interbank on Tuesday. The American dollar started trading at Rs60.38, stood motionless and remained unchanged at close of markets.

The rupee gained 3 paisa against the dollar in interbank dealings. The US dollar started trading at Rs60.38, shed mere grounds and changed hands at Rs60.35 at close of markets on Wednesday.

The rupee showed no change against the dollar in interbank dealings. The US dollar opened at Rs60.35, stood motionless and remained unchanged at close of markets on Thursday.

The rupee continued to show no change against the dollar in interbank dealings. The US dollar opened at Rs60.35, stood motionless and remained unchanged at close of markets on Friday.

The euro gained significant grounds against the rupee in the open market this week. The euro started new week�s trading at Rs83.20, posted gains and was changing hands at Rs83.60 at close of markets on Saturday. Thus, the local currency recorded a loss of 40 paisa against the single currency in open market dealings.

The rupee lost 70 paisa versus pound sterling in the open market. The pound sterling opened the new week�s trading at Rs123.10, continued to post gains and changed hands at Rs123.80 at close of markets on Saturday.

The Japanese yen did not show any change versus the rupee in the open market this week. The yen new week�s trading at 51 and ended the week at the same price at close of markets on Saturday.

At the international level, the dollar fell the most in almost a month against the euro, trading within a cent of its record low, after US reports showed slowdowns in payroll growth and service industries.
Key indices the Bombay Stock Exchange (BSE) 30-share Sensex and the Nifty ended in the red in high volatility in the week under review largely due to Wednesday’s stock carnage on global worries.
The markets, however, witnessed positive trend during most part of the week following a spate of encouraging factors including the Reserve Bank of India’s (RBI) quarterly review of monetary policy, which was considered very good for the market and robust earnings season.
The RBI kept Bank Rate and Reverse Repo Rate unchanged while raising the Cash Reserve Ratio (CRR) by 50 basis points.
The apex bank also maintained GDP growth forecast at 8.5 per cent for this fiscal.
The only worrying factor that weighed on markets was fears of pull out by foreign institutional investors (FIIs) amid a worldwide stocks crash triggered by US subprime mortgage and credit market worries.
FIIs were net sellers to the tune of Rs 1,341 crore in five days between 27 July and 2 August. They reported net sales of Rs 142.70 crore (provisional) on Friday. The BSE barometer plunged by 615.22 points, registering the third biggest fall on 1 August.
The Sensex, which fell below the 15K level while moving in a wide range of 15,568.85 to 14,896.47, ended the week at 15,138.40 against last weekend’s close of 15,234.57, a net loss of 96.17 points.
The broader S&P CNX Nifty of the National Stock Exchange (NSE) dropped by 43.65 points or 0.98 per cent to close the week at 4,401.55 from the previous weekend’s close of 4,445.20.
The IT sector was the worst sufferer in view of a sharp rise in the rupee value against the dollar. As a result, the BSE IT index dipped by 172.04 points or 3.53 per cent to 4,704.30 from the previous weekend’s close of 4,876.34. Auto, realty and refinery shares also bore the brunt of selling onslaught by foreign funds.
The markets are expected to look for a cue from global markets during next week and also keenly watch for the outcome of US Federal Reserve’s policy meeting on 7 August, according to market players.
During the week, the trading volume on the BSE and the NSE was low at Rs 25,634 crore and Rs 54,166 crore compared to last weekend’s turnover of Rs 29,617 crore and Rs 68,049 crore respectively.
The broad-based BSE-100 Index moved down by 37.58 points or 0.48 per cent to end the week at 7,801.35 from the previous weekend’s close of 7,838.92.
The BSE-200 Index and the Dollex-200 were quoted modestly down at 1,846.73 and 762.17 at the weekend from last weekend’s close of 1,855.91 and 763.41 respectively.
The BSE-500 Index fell by another 26.42 points to finish the week at 5,915.94 from the preceding weekend’s close of 5,942.36 and the Dollex-30 ended lower at 3,080.96 from 3,090.19 last weekend.
On the NSE, the S&P CNX Defty softened by 26.00 points or 0.68 per cent to close the week at 3,779.95 from 3,805.95 last weekend and the S&P CNX Nifty Junior by 53.45 points or 0.61 per cent to conclude the week at 8,668.55 from 8,722.00.