Khanani & Kalia International (Pvt) Limited Weekly Market Review on Sunday (June 18, 2006)
The gradual decline in dollar's price was mainly due to a narrow margin trading of the currency in the inter bank as well the international market. demand in the kerb was significant but supply was equally fair to control dollar's price on the desks. Similar trend was seen in the inter bank where importers continued to buy for their year end payment but with good supply coming in rupee managed to show resistance.
On the international desks, dollar initially received supports against euro after French Finance Minister Thierry Breton, signalled after the G8 meeting that he was happy the euro had not extended recent gains and said euro zone rates dit not need to climb too quickly.
The inflation report released on Tuesday came stronger than expected as May core producer price index edged up to 0.3%, besting both forecasts for a rise to 0.2% and April's 0.1% reading. After that, the dollar traded at a seven week high against euro and yen as market expectation is now almost solidified that FED would go for another rate hike in its upcoming meeting on June 28-29 and thus dollar's yield advantage over majors would persist at least for some more time.