Settling the markets, will the Rupee and Sensex follow suit.

Indian Rupee: impacted after the Dow Jones it will now be the turn of the dollar. In the past two weeks bourses (Stock Markets) the world over have been under stress. Now, the dollar is likely to add to the turmoil.

The dollar has been falling for quite a while not only against the euro but against many other currencies. In the last six months, the Brazilian real appreciated 11 per cent, Thai baht 11.5 per cent and the South Korean won 2.8 per cent. The Chinese yuan was kept fairly tied to the dollar and appreciated a mere 2.4 per cent. The Indian rupee, on the contrary, was left to the mercy of the market for fear of inflation and appreciated 9.4 per cent, causing many of the export industries considerable strain.

The Japanese yen had made a reversal because of the 'carry trade'. It had climbed down to 124 to the dollar in June. But in the last two weeks the dollar has been falling fast against the yen because, with the chaos in the mortgage market, the 'carry trade' nearly vanished. Consequently, the demand for dollars in Japan dropped and the dollar weakened against the yen.

The dollar will fall further for a variety of reasons. The US economy is slowing down with recession almost in sight. The housing boom is at its end with huge defaults in sub-prime loans causing havoc in the credit market. Industrial growth has dropped and unemployment has risen from 4.5 to 4.6 per cent. Trade deficit in the twelve months ending May has climbed to $ 827 billion. Inflation has eased but is still higher than in Eurozone.

It is against this background that the Federal Reserve decided on 7th August to let the interest rate stay put at 5.25 per cent and, from the assessment made by Ben Bernanke, Federal Reserve Chairman, may linger there for the rest of the year. That keeps foreign investment in US treasuries attractive if only the dollar does not weaken. The latter may be difficult because other economies are performing better.

In the European Union, GDP growth has picked up and is currently more than 3 per cent. Germany, the largest member of EU, is on the bounce. Growth is high, inflation is low, employment is on the upswing, trade is booming and the euro looks strong and safe. Many central banks are re-constructing their currency reserve portfolios with more investment in Euro securities and less investment in US treasuries.

Gold futures rallied Friday, as traders recognized the metal's allure as a safe haven amid worsening credit market troubles that prompted a fresh injection of cash by several central banks.
"Suddenly, the world is realizing that gold is still a safe haven asset," said James Moore, metals analyst at TheBullionDesk.com. "We've seen pretty substantial losses in equity markets."
"I think this is genuine safe-haven buying," Moore said.
Gold for December delivery rose $8.80 to close at $681.60 an ounce on the New York Mercantile Exchange. However, the contract posted a loss of $2.80 on the week.
"Gold investors breathed a collective sigh of relief today as signs of 'proper' behavior in the metal finally emerged," said Jon Nadler, analyst at Kitco Bullion Dealers, in emailed comments.
"The massive injection of liquidity that is taking place globally was also followed by the Fed in an attempt to stabilize values and nerves," Nadler said. "Gold benefited from that action but also from being directly in demand."
Central banks in Europe, Asia and the U.S. injected billions of dollars into banking systems Friday, moving to further boost liquidity in markets suffering the ripple effect of the subprime-credit crisis and saying they stood willing to provide more cash. Read more.
The Federal Reserve said Friday it's providing liquidity "to facilitate the orderly functioning of financial markets." In a brief statement, the Fed said it will provide reserves "as necessary" through open market operations to promote trading in the federal funds market at rates close to 5.25%. See The Fed.
"You are starting to see some bargain-hunting buying coming here," said Charles Nedoss, gold analyst at the Peak Trading Group. "What the Fed did in terms of pumping liquidity into the markets is bullish for the metals. You're going to see some flight-to-quality type buying."
On Thursday, gold fell $13.50, or 2%, to close at $672.80, its weakest closing level since July 27. Read more.
"We saw the market sell off in a global liquid crunch as funds exited gold trades to meet cash margin requirements and to free up capital in general," said Zachary Oxman, senior trader at Wisdom Financial, in emailed comments. "This move was not in the direction of the primary trend and was, more than anything, a temporary move."
"Fundamental factors that support this market continue to be unchanged, which is another reason why I feel that the gold moves of this week to the downside were nothing but short-term liquidity plays that will not hold," Oxman said.
"The market is seeing a re-investment of fund money, strength in the Indian rupee, a positive seasonal pattern and concerns over labor issues in South Africa."
Asian and European equities posted steep declines. On Wall Street, U.S. stocks remained under water after an attempted rebound. The Dow Jones Industrial Average ($INDU :
13,164.19, -106.49, -0.8% ) was last down 100 points. See Market Snapshot.
Other metals prices ended mixed on Nymex. September silver gained 16.50 cents to close at $12.870 an ounce and October platinum rose $4 at $1,279.30 an ounce.
September palladium fell $4 to end at $358.20 an ounce and September copper edged down 0.15 cent at $3.3595 a pound.
The dollar traded slightly lower against most major European currencies. Japan's yen was steady against the dollar but rose against most high-yielding currencies as investors sought to unwind positions on risky trades ahead of the weekend. See Currencies.
Crude-oil futures pared most of their losses. See Futures Movers.
Inventories and indexes
Gold warehouse inventories fell by 9,864 troy ounces to 7.14 million troy ounces as of late Thursday, according to Nymex data. Silver and copper supplies were both unchanged to stand at 133.3 million troy ounces and 21,655 short tons, respectively.
There are good chances therefore that the dollar will fall against both the euro and the yen. It will not be long before the dollar will trade at 1.4 to the euro or 110 yen to the dollar. The rupee may not appreciate because the trade deficit has bloated, the limit on ECBs for domestic spend has been lowered and, with the slow down in the US economy and the chaos in the credit market, FII investment in India will taper down.
Rupee / US Dollar Forex Currency News, Gold in India, and The Sensex index on the Bombay Stock Exchange (BSE).
Euro / Rupee and Yen / Rupee.Mumbai, Aug 10 The Indian market continues to be impacted by global uncertainties.

Responding to the Dow closing lower on Thursday at the New York Stock Exchange, the market suffered further losses on Friday. The benchmark BSE Sensex was down by 231.9 points to close at 14,868.25 today.

The Sensex opened 425 points lower at 14,675 to fall further to an intra-day low of 14,571 in early session deals. However, ‘short covering’ and ‘value’ buying, especially in information technology and consumer durables stocks, in the afternoon session saw the index shrug off, at least partially, the market’s ‘US sub-prime’ woes.

Sub-prime mortgages are the riskiest property loans, often extended to people who have payment difficulties or a bad credit history.

But the recovery, such as it was, was not good enough and the index closed the day at 14868.25, down 1.54 per cent from the previous day. On the BSE, market breadth was negative as 1016 stocks advanced while 1597 stocks declined.

“Panic selling has been triggered in the Indian market on unconfirmed reports that the sub-prime crisis has started affecting other European banks as well,” said Mr N.V. Shah, Director, NVS Brokerage.

Central banks globally are pumping a lot of money to ensure liquidity, which clearly suggests that there is a problem, said a senior official from a Mumbai-based asset management company. Market players believe sentiments continue to be weak as the actual size of the sub-prime problem is not known. “Stability will be back in the global markets only when there is complete dissemination of the depth of the problem. We will have clarity as more information about the size of the crisis starts trickling in the next few days,” said Mr Anil Advani, head of research, SBICAP Securities.

Even though the sub-prime crisis does not have a direct impact on the Indian equity markets, it has affected the flow of funds into India, said Mr Shah. Banking stocks witnessed a steep fall. Except information technology, all sectoral indices registered losses. IT registered gains as the rupee marginally weakened against the dollar to close at Rs 40.63/64 today, said Mr Vishwas Agarwal, Technical Analyst.