DAILY FOREX REPORT FOR 27 JUNE 2014

MARKET HEADLINES

Rupee down five paise against dollar
The rupee dropped five paise to 60.17 against the American currency in morning trade today on fresh demand for the dollar from banks and importers despite the US unit's weakness in the overseas markets. The rupee resumed slightly higher at 60.10 per dollar as against the last closing level of 60.12 at the Interbank Foreign Exchange (Forex) market on initial selling of the American currency by banks. However, it dropped immediately to 60.20 on fresh demand for the dollar from banks and importers before quoting at 60.17 per dollar at 1000 hours. It hovered in a range of 60.08 and 60.20 per dollar during the morning deals. In New York market, the dollar fell against the euro yesterday after data showed the US economy shrank 2.9 per cent in the first quarter, which could validate the Federal Reserve's commitment to keep interest rates low. Meanwhile, crude oil prices saw a mixed pattern of trading in Asia in early trade today ahead of the release of fresh US economic data. US benchmark West Texas Intermediate rose 13 cents to USD 106.63 while Brent crude eased two cents to USD 113.98 in mid-morning trade. The benchmark BSE Sensex dropped 131.21 points, or 0.52 per cent, to 25,182.53 at 1000 hours.

China's yuan set for 2nd consecutive weekly drop
China's yuan edged higher on Thursday but looked set for its second straight weekly loss against the dollar as an uncertain economic outlook prompts some investors to reduce their positions. Spot yuan changed hands at 6.2327 per dollar, slightly above Wednesday's close of 6.2344. The People's Bank of China (PBOC) fixed the yuan midpoint at 6.1538, stronger than Wednesday's fixing of 6.1555. On
a weekly basis, the yuan is set to weaken by 0.1 percent against the dollar in June, a second consecutive weekly loss. The renminbi has lost 2.7 per cent against the dollar so far this year as the central bank flushed out speculators, becoming one the worst players among its emerging market peers, according to Thomson Reuters data. While some analysts are optimistic the currency may reclaim some
of its losses in the second half of the year as the government launches more targeted stimulus activity to shore up economic growth, the slack in the global economy is prompting some of them to turn more cautious. Premier Li Keqiang said last week that China's economy would not suffer a hard landing and would continue to grow at a medium to high pace in the long term without strong stimulus. The International Monetary Fund cut its growth forecast for the United States last week to 2 per cent for 2014 from 2.8 per cent it predicted in April. Renewed weakness in the global economy led by the United States could prompt China to keep the currency weak to ensure exports remain competitive.

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