Rupee to start up on dollars broad drop, shares key

The rupee is expected to open stronger on Tuesday tracking the dollar's losses overseas, but the domestic sharemarket performance would be key for direction.

The index of the dollar against six major currencies was down 0.2% at 74.897 points at 0250 GMT, and below 75.379 when the local forex market closed on Monday.

The euro extended gains in early Asian trade after remarks by the head of the eurozone bailout fund that the facility's guarantees will be raised triggered short-covering, though its advance could stall ahead of a confidence vote on the government in the Greek parliament.

Almost all Asian currencies were stronger versus the dollar.

Traders expect the rupee to open around 44.95 to the dollar and move in a 44.90 to 45.10 band, with a possibility of slipping to 45.25 if shares remain weak through the day.

The rupee had ended at 45.00/01 on Monday, after falling to 45.06 - a level last seen on May 31, and 0.3% weaker than Friday's close of 44.86/87.

The MSCI index of Asian stocks ex-Japan was up 0.4%, while the Nifty futures traded in Singapore were down 0.1%, suggesting a flat to slightly lower start to the local market.

BRICS to use own currencies for credit, grants

In a first-of- its-kind step, Brazil, Russia, India, China and South Africa (BRICS) will be signing an agreement on Thursday under which they would be able to give credit and grants to each other in their own currency instead of dollars.

The Summit, to be attended by Prime Minister Manmohan Singh in Chinese resort city of Sanya, will discuss a whole range of issues related to global financial and economic situation besides matters related to energy security, food security and challenges posed by terrorism.

At the Summit, South Africa will join as the new member, making it a five-nation grouping of fastest growing economies. BRICS will be discussing the reform of the international financial system, National Security Adviser Shivshanker Menon told journalists accompanying the Prime Minister to Sanya.

"We (BRICS) are making a beginning... An agreement will be signed under which BRICS countries will be able to issue credit or grants to each other in own currency," Menon said, noting that it was first such step.

Asked about India''s position on Chinese efforts to make its currency Yuan as an alternate to dollar for trade, the NSA said there was no such proposal before the BRICS to make Yuan as a reserve currency.

When pressed further, he said it was a larger issue related to reform of the international monetary system and could not be settled by five countries. Commerce and Industry Minister Anand Sharma said: "we have not reached a stage to make a definite statement" on this issue.

Sharma said the BRICS countries, which are fastest growing economies and projected to contribute 48 per cent to the global economy in the next decade, would discuss their role in addressing the international financial and economic crisis.

As part of the evolution process of BRICS, the Trade and Economy Ministers would be meeting for the first time to take stock of the international economic situation and their inputs would go to the Summit on Thursday.

The BRICS countries have been pushing for restructuring of the global financial architecture to make it more representative. Sharma said the BRICS countries would discuss how to coordinate to enhance their trade and economic relations and contribute to the global economy.

In the context of India, he said it was trying to increase exports as it aspires to have a trade volume of USD 450 billion by 2014 with the world. The trade volume stood at USD 200 billion in 2010-11 and touched USD 208 billion in February last.

To increase commerce, India recently signed trade- opening Comprehensive Economic Partnership Agreements (CEPA) with Japan and Malaysia and was fast-tracking negotiations on such pacts with Indonesia, Thailand and Canada.

Moneycontrol

Asian currencies mostly down against dollar

HONG KONG: Major Asian currencies ended the week mainly lower against the dollar as US jobs data was not as bad as feared, although concern persisted over the state of the world's largest economy.

JAPANESE YEN:

The yen fell back from a three-week high against the dollar but market players remained reluctant to buy the greenback due to worries over US economic weakness.

The Japanese currency rose to the week's high of 105.25 to the dollar on Monday on an upgrade of the Japanese government bond rating, but gradually lost ground to hit a low of 106.88 on Friday.

It ended daytime trading at 106.72-75 to the dollar on Friday, slightly off from 106.34-36 a week earlier. There were persistent concerns over the US economy amid soaring oil prices and falls in US and Japanese stocks.

The European Central Bank raised its key rate by a quarter point to 4.25 percent on Thursday as expected, but ECB chief Jean-Claude Trichet signalled the bank had not embarked on a series of hikes.

Societe Generale senior forex manager Kenichi Yumoto said there was "no room for an interest rate hike in the United States either." "You can never be hawkish in monetary policy with stock prices falling and payrolls shrinking," he said.

The US economy lost 62,000 jobs in June, well below the figure of 100,000 that some had feared, official figures showed on Thursday.

"Despite a slight recovery in US stocks (on Thursday) overall global stock performance is still weak and players are nervous about volatile markets," Okasan Securieties senior trader Tsutomu Soma told Dow Jones Newswires.

No significant US economic indicators are due next week but players may become more cautious ahead of the release of US financial institutions' earnings results, traders said.

AUSTRALIAN DOLLAR:

The Australian dollar's recent volatility is expected to continue next week as the currency pushes closer to parity with the greenback, dealers said.

The Australian dollar was trading at 96.20 US cents at 5:00 pm (0800 GMT) Friday, up on the previous week's 95.90 US cents.

AMP Capital Investors chief economist Shane Oliver said high prices for coal and iron ore exports had helped Australia record its first monthly trade surplus in six years for April, which was likely to further boost the currency.

"While the ride for the Australian dollar will remain volatile, Australia's strong terms of trade and high relative interest rates are supportive of further gains," he said.

"We remain of the view that it is only a matter of time before parity is reached.

"The elimination of the monthly trade deficit on higher iron ore and coal prices will also likely be a positive for the Australian dollar," he added.

NEW ZEALAND DOLLAR:

The New Zealand dollar ended local trading Friday at 75.61 US cents, down from 76.05 at the end of the previous week.

The currency lost ground midweek after central bank governor Alan Bollard said the economy would be flat in the second quarter before picking up later in the year.

The kiwi rose against the greenback but weakened at the end of the week after the US dollar rallied on payroll data suggesting the US job market and economy were not as dire as many investors had feared.

Bank of New Zealand currency strategist Danica Hampton said the local dollar was also dragged down against the greenback by the plunge in the euro against the US currency.

This followed the European Central Bank taking a less hawkish tone on future interest rate rises, following its decision to raise rates by a quarter percentage point.

CHINESE YUAN:

The yuan closed at 6.8626 to the dollar Friday on the exchange-traded market, compared with Thursday's close of 6.8510, and a closing price of 6.8609 to the dollar last Friday.

On the over-the-counter market, it ended at 6.8589 to the dollar against 6.8510 in the previous day.

The central bank had set the yuan central parity rate at 6.8639 to the dollar Friday, compared with 6.8529 on Thursday.

The People's Bank of China allows a trading band of 0.5 percent on either side of the midpoint.

HONG KONG DOLLAR:

The US-linked Hong Kong dollar finished the week at 7.799 to the greenback compared with 7.8016 the week before.

INDONESIAN RUPIAH:

The rupiah ended the week's trading at 9,215 to the dollar compared to 9,213 a week earlier.

PHILIPPINES PESO:

The Philippines peso fell to 45.45 to the dollar on Friday afternoon from 44.79 on June 27.

SINGAPORE DOLLAR:

The dollar was at 1.3600 Singapore dollars on Friday from 1.3646 the previous week.

SOUTH KOREAN WON:

The won slumped to a 32-month low of 1,050.40 to the dollar Friday, compared with 1,041.5 won a week earlier, as oil price continued rising and foreign investors kept dumping local stocks.

The government was forced to intervene Wednesday, when the dollar surged to 1,057 won. Authorities poured an estimated four billion dollars in a matter of an hour or so, dealers said. The dollar then plunged 22 won.

But government intervention apparently eased the following days, after an unidentified senior official of the presidential Blue House reportedly said government authorities should take their hands off the market.

News reports here said South Korea had spent at least 10 billion dollars over the past three months to help bolster the weakening won and ease inflationary pressure from high oil prices.

TAIWAN DOLLAR:

The Taiwan dollar fell slightly to close Friday at 30.401 against the US dollar, down from 30.388 a week earlier.

THAI BAHT:

The Thai baht rose slightly against the greenback over the week as poor US economic data caused the dollar to weaken, dealers said. The Thai unit closed on Friday at 33.48-49 to the dollar compared with the previous week's close of 33.53-56.