THE OUTGOING week was full of uncertainties. For the first time the investors saw euro capturing the market. Late dollar touched new lows versus the rupee as most investors decided to off-load dollars and started investing in other currencies, particularly euro.
The rupee attained new highs against the dollar. In the inter-bank market heavy dollar buying by some local and foreign banks on the opening day of the week resisted the rupee from making further gains, on the contrary it lost 7 paisa on buying and 5 paisa on selling over the previous week’s level to trade at Rs59.65 and Rs59.70 against the dollar on July 15. On July 16, the rupee shed another 2 paisa on selling to trade at Rs59.67 and Rs59.68 amid confusion.
Continued dollar-buying by banks to cover the corporate sector demand on July 17, exerted pressure on the rupee. At the same time the central bank buying of $100 million and increased demand from the importers also restricted further fall in dollar value, exerting pressure on the rupee. However, dollar selling by exporters and offloading of about $40 million by the PTCL restricted rupee decline against the dollar. The rupee on the other hand gained 2 paisa for buying and lost 2 paisa for selling to trade at Rs59.65 and Rs59.70 on July 17.
As dollar selling by exporters continued on July 18, amid low demand from the corporate sector and importers, the rupee continued to gain over the dollar. It traded at Rs59.56 and Rs59.58 on July 18, up 9 paisa on buying and 12 paisa on selling against the overnight level. The State Bank of Pakistan reportedly intervened in the inter-bank market on July 19, for the third day in a row to limit further decline of dollar. The rupee-dollar parity continued stable, showing no change in the overnight rates.
Against other major currencies at the forex counter, the rupee last week remained week against the British pound, the euro, Danish krone, Swiss franc and Qatari riyal. It, however, displayed strength over the Canadian, Australian, New Zealand, Hong Kong and Singapore dollars, Swedish krona, Norwegian krone, Chinese yuan, Malaysian ringgit, Saudi riyals, the UAE, dirham and Kuwaiti dinar. The rupee was unchanged versus the Japanese yen this week.
In kerb trading investors seem to have lost confidence in dollar. Most investors are trying to offload their dollar holdings and buy euro, while the rupee continued to maintain its upward rising trend against the dollar. On July 15 it gained 10 paisa over the dollar to trade at Rs59.65 and Rs59.75 versus previous weekend close of Rs59.75 and Rs59.85. But at the sometime, the rupee lost 20 paisa versus the euro, which traded at Rs59.30 and Rs59.50. The rupee continued to gain versus the dollar in the kerb. It was up 5 paisa at Rs59.60 and Rs59.70 on July 16, but it touched new lows versus the euro breaching Rs60 mark.
Bullish sentiments prevailed in the open market on July 17, where the rupee gained 35 paisa in a single day trading to touch new peak at Rs 59.25 and Rs59.35 against the dollar. Even the central bank intervention failed to stop dollar decline in the kerb. The US dollar selling continued on July 18, amid low demand, the rupee appeared to be heading towards rash mark. It gained 15 paisa during the day to trade at Rs59.10 and Rs59.20. The central bank intervention for the third day, however, kept the parity intact on July 19, showing no change in the overnight level. The rupee in the kerb gained 65 paisa during the week.
In the international financial market the euro broke through the psychologically significant parity mark against the dollar July 15. While the yen hit a post - September 11 high versus the greenback as investors continue to question the strength of a US economic recovery and pummel the greenback. Weakness in the dollar was pervasive as the US stocks were pounded again by accounting scandals and apprehension that second quarter corporate earns, which start rolling in earnest this week will be disappointing.
The euro, which last saw the one-to-one level in February 2000, traded just under its high of $1.0070, brining its 2002 gains to roughly 13 per cent. On the day, the euro is up 1.60 per cent compared with previous weekend close.
With the Japanese finance minister’s track record of verbal gaffes and cryptic remarks, forex traders paid little heed to the nationally televised comment that a dollar range of 125-135 yen would be favourable for Japan’s economy. The dollar fell to 115.65 yen, below its lost level since February 2001. Sterling jumped to a better than 2-year high against the dollar, rising to $1.5667, a 0.85 percent gain on the day.
The British pound leapt to its highest level against the dollar in over two years concern over the US corporate profitability knocked the greenback below parity with the euro. The pound rose more than a cent to $1.5667, breaking through key chart barriers to its strongest level since May 2000. But it slipped to a one-week low against a resurgent euro at 64.37 pence.
The dollar suffered a second day of hefty losses this week against most major currencies on July 16, after crashing below euro parity the previous day, as the US equity futures signalled a fresh wave of investor fright. The dollar remained shaky in Asia after its symbolic overnight fall below parity against the euro, and its fortunes now hang on testimony by the Federal Reserve Chairman Alan Greenspan later in the day.
The euro advanced near its overnight peak of $1.0089 up from $1.0030/35 in the late US trade and from around $0.9950 at the same time. The euro took in its stride remarks by the European Commission President that a strong exchange rate has disadvantages as weft as advantages. The jubilant euro also finned against the yen to 117.12/21 yen compared to 116.73/80 yen in the late US trade. The yen was alto gaining on the dollar at 116.12/10 yen per dollar compared to 116.32/37 in late US trade.
The British pound held near two-year highs against the ailing dollar as early comments from the Federal Reserve chief Alan Greenspan failed to restore investor confidence in the US assets. But sterling stumbled to a two-week low against the euro as the single currency drew even greater advantage from the dollar’s distress. Sterling rose almost a cent to a 26-month high at $1.5787 in the European mid-session, but pared gains later in the day as heavy selling against the euro knocked it to two-week lows at 64.48 pence.
On July 17, the dollar dragged itself up from 17-month lows against the yen in Tokyo but dealers doubted the respite would last long given the mysterious lack of intervention action from the Bank of Japan. After diving to 115.50 yen in overseas trade, bargain-hunting by Japanese pension funds and repatriation demand from the US operators helped the dollar to a session high of 116.30.
But it was back down to near 115.90 in late trade as the market proved unable to shake off the gloom from the US corporate accounting scandals, despite a reassuring Senate testimony by Federal Reserve Chairman Alan Greenspan. The dollar was quoted at 115.92 yen against 115.63 yen in late US trade. The euro firmed slightly to $1.0127 against $1.0115 in late US trade. Its rose to a fresh 2-1/2 year high of $1.0148 on July 16, with many dealers forecasts the single currency would test $1.02 in the near term.
Sterling fell half a per cent against the dollar as the greenback pushed higher across the board on firmer US stock markets. The US dollar has been held hostage to the fortunes of the Wall Street stocks in recent weeks, as worries over earnings and corporate accounting practices have battered investor confidence in US assets. The Dow Industrial’s average, which had fallen over the past seven sessions, was up one percent in early New York trade on July 17. The pound was steady against the euro after briefly dipping on news that again only one member of the Bank of England’s Monetary Policy committee voted for an interest rate hike in July. Sterling was trading at $1.5670, more than a cent off 26-month highs hit. It also traded at 64.28 pence per euro above a two-week low of 64.48 hit in the previous session.
The US currency failed to gather enough momentum to reclaim the psychologically significant $1.00 per euro lever which the European currency hurdled at the start of the week. The dollar alto firmed modestly against the yen, taking a rate break from recent steep declines. It has tumbled 10 yen in the past month, hitting 17-month lows below 116 yen this week.
As the US trading ended, the dollar stood at 116.31 yew up 0.41 percent from the prior day’s US close but nearly half a yen below session highs. The euro ended at $1.0070, down 0.44 per cent on the day, but above the $1.0034 session low. ‘The US currency has dropped more than 10 per cent against the euro and yen this year amid corporate accounting scandals, poor earnings and the slump in stock prices, and those concerns are unlikely to be resolved quickly, analysts said.
On July 18, the dollar seesawed in Asia still weighed by suspicions about accounting practices at the US firms even after the US stocks rebounded the previous day. It stood at 116.43/49 yen off the day’s high of 116.66. But it maintained slim gains compared with 116.31 yen in late New York on July 17 and a 17-month low of 115.50 on July 16. The euro was generally solid versus the dollar. It firmed near $1.01 before easing back to $1.0078180, still slightly higher than $1.0068 in late US trade, hitting a 2-1/2 year peak of $1.0162. Sterling was range-bound against the dollar and the euro as it paused for breath after a week in which it hit 26-month highs against the dollar before falling back nearly two cents. It was trading at $1.5668 compared with a 26-month high of $1.5787 hit earlier in the week. Against the euro, it traded at 64.22 pence compared with two-week lows hit of 64.49 hit on July 17.
