DAILY FOREX REPORT FROM RESEARCH VIA 5/Aug/2014

MARKET HEADLINES

• Rupee gains 29 paise against US dollar The rupee recovered from over four-month low by strengthening 29 paise to 60.89 against the dollar in early trade today at the Interbank Foreign Exchange market on increased selling of the US currency. Forex dealers said a higher opening in the domestic equity market also supported the rupee but the dollar's gain against other currencies overseas limited the rise. The domestic currency had lost 63 paise to close at over four-month low of 61.18 against the dollar in Friday's trade on weakness in global stock markets and a strong US currency overseas. Meanwhile, the benchmark BSE Sensex recovered by 128.14 points, or 0.50 per cent, to 25,608.98 in early trade today.
• Euro slips in Asia on Portugal bank bailout The euro slipped against the dollar in Asia on Monday following news of a bailout for a crisis-hit Portuguese bank, while the dollar held steady after falling on US jobs data. Portugal's central bank announced late Sunday that the nation will inject 4.4 billion euros ($5.9 billion) into the Banco Espirito Santo (BES) amid fears of a catastrophic bank run. The euro bought $1.3421 in Asia on Monday, down from $1.3430 in US trade late Friday, while fetching 137.80 yen against 137.75 yen. The dollar was at 102.66 yen compared with 102.60 yen in New York on Friday. The dollar slipped on Friday after US jobs data for July turned out to be solid but not strong enough to boost inflation expectations. Stocks were lacklustre Monday, weighed down by concerns over the impact of stricter sanctions on Russia on European economies and the situation surrounding the BES, said Yoshihiro Okumura, general manager of research at Chibagin Asset Management. "European risk is having an impact on the broader market," Okumura told Dow Jones Newswires. BES, Portugal's third-largest banking group, will be split into two entities, with its toxic assets isolated and its healthier assets regrouped in a new Novo Banco, national bank governor Carlos Costa said late Sunday. The market focus is now shifting to Thursday's monthly meeting of the European Central Bank (ECB), although it is widely expected to hold fire on new policy action despite a lingering threat of eurozone deflation and geopolitical risks. "The ECB might be enjoying a summer lull, eventually, with no hints of new action expected" at the upcoming meeting, Credit Agricole said in a note. The Bank of Japan (BoJ) is also scheduled to hold a two-day policy meeting later this week.

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