Demand helps dollar gain versus rupee in the kerb

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Forex Research - Open Market Comments

The national currency shed grounds versus dollar in the kerb dealings today.  The American dollar kicked off new day’s trading at Rs.79/00, posted more gains and was trading at Rs.79/10 at close of markets on Friday. Thus, rupee ended the day on a negative note versus dollar in the open market.  In the international, the dollar and gold will extend their gains on investor risk aversion as the precious metal departs from its correlation with crude oil, according to UBS AG.

The U.S. currency in past years traded in the opposite direction of gold and crude oil. In 2009, the precious metal and oil diverged, with the dollar and gold rallying on demand for the safest assets while the global economic recession kept the price of petroleum low.

“The shift now in these relationships shows how the greenback is benefiting further from risk aversion and slumping global growth this year,” wrote Mansoor Mohi-Uddin, chief currency strategist at UBS in Zurich, in a research note today. “Safe-haven demand is driving bullion higher again. In contrast, fears about global growth and the ability of the authorities in the G-7 countries to avert an extreme recession are pushing oil prices further down.”

The U.S. currencies will strengthen to $1.20 by the end of the year and gold will appreciate further as investors seek refuge from global economic turmoil, according to UBS.

Gold rose 5.5 percent last year, trading at $947.40 today, while crude dropped 54 percent in 2008, reaching $33.94 a barrel today. The dollar traded at $1.2823 per euro after appreciating 4.4 percent last year.


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