DOLLAR continued to weaken against the rupee. However, repeated interventions by the central bank limited the dollar fall. At the same time supply of euro increased substantially enabling it to capture 20 per cent dollar-dominated market.

In the past two weeks most investors had off-loaded their dollar holds and were investing in euro. Dollar selling amid lack of demand had pushed it to record lows at Rs59.57 and Rs59.59 on July 19, in the inter-bank market. Euro on the other hand crossed Rs60 barrier and was trading at Rs59.92 and Rs60.12,05 piasa more than the dollar. Selling continued, amid limited demand on July 22, but the State Bank of Pakistan extended support to dollar, which resisted further fall in dollar value in the inter bank market. The dollar traded unchanged on the opening day of the week.

The continued SBP support help stablized the dollar in the inter-bank market on July 23. During the course of the trading session, the dollar was seen gaining some strength, while the rupee shed 1 paisa to trade at Rs59.58 and Rs59.60 versus the dollar. On July 24, dollar recovery drive halted. The rupee gained 5 paisa trading at Rs59.52 and Rs59.55. However, increase in dollar demand on the following day pushed the rupee down, which shed 2 paisa for buying to trade at Rs59.54 and Rs59.55 on July 25. On July 26, the dollar slipped slightly in relation to rupee amid dull activity losing 2 paisa to trade at Rs59.52 and Rs59.54, in the absence of dollar buyers. During the week as a whole, the rupee showed an appreciation of 5 paisa over the dollar amid fluctuations.

Against other major currencies, the rupee at the inter-bank forex counter, extended its strength over most currencies. It gained further ground last week versus British pound, euro, Canadian, New Zealand, Australian and Singapore dollars, Swiss franc, Danish and Norwegian krones, Swedish krona and Kuwaiti diner. The rupee was, however, stable versus the Chinese yuan, Malaysian ringgit, Hong Kong dollar, Saudi and Qatri riyal and the UAE dirham.

In kerb trading, the rupee rise was halted as the dollar buying increased amid improved activity on July 22. The rupee lost 10 paisa against the dollar on the opening day of the week and traded at Rs59.30 and Rs59.40 against Rs50.20 and Rs59.30 of last week. On July 23, rupee/dollar panty remained almost stable with dollar marginally shedding 3 paisa for selling to trade at Rs59.30 and Rs59.37. On July 24, fresh dollar buying emerged after the central bank intervention. With the dollar gradually gaining strength, the rupee lost 25 paisa for buying and 28 paisa for selling to trade at Rs59.55 and Rs59.65. The dollar strength extended on July 25, the parity did not show any change in its overnight level.

As demand for euro increased on July 26, it picked up 20 paisa against the rupee to trade at Rs59.60 and Rs59.80, while rupee-dollar parity ruled unchanged at Rs59.55 and Rs59.65. In the past one week, however, the rupee in the kerb has depreciated by 35 paisa against the dollar, while on the other hand euro value in relation to rupee has appreciated by 32 paisa, despite 20 paisa decline in a single session on the last day of the week.

Currency analysts are of the view that the euro is likely to continue its prevailing trend in the forex market and may break Rs60 barrier in the near future. So far the dollar has managed to recover with the SBP support.

In the international financial market, the dollar rebounded on July 22, from last week’s multi-year lows, despite a roller-coaster ride for the US stocks, while a drubbing of the European equities diminished the immediate appeal of the euro. Declines of 5 per cent in the major stock indexes for Britain, France and Germany, plus the overhang of possible intervention by Japanese financial authorities to help stem the yen’s ascent lent support to the greenback.

The euro traded as high as $1.0132 in Asian trade, but saw its price gains erode by late in the New York session to trade at $1.0071, a loss of 0.41 per cent compared with previous weekend close and just above the session low $1.0056. The euro hit a 2-1/2 year high of $1.0210 on July 19. The dollar rose to a session high 116.66 yen and ended not to far from the top at 116.30 yen, up 0.40 per cent on the day and up from last week’s 17-month low of 115.34 yen.

Sterling pulled away from the previous session’s 27-month high against the dollar as the greenback steadied on the back of gains on Wall Street. But the pound trimmed early losses made on talk of merger and acquisition related capital outflows after a report in Britain’s Sunday Express newspaper that the UK drugs giant GlaxoSmithKline is considering a 26 billion pound ($56.7 billion) bid for the US rival Eli Lilly. The sterling was trading at $1.5747, having reached $1.5854 on last week, its strongest since April 2000.

The dollar staged a broad-based rally in Tokyo on July 23, pushing Me euro below parity for the first time in a week amid heavy repatriation of funds by US bank detected after plunges in US share prices. The greenback rose to a 1-1/2 week high of 117.35 yen, while it strengthened to as high as $0.9956 against the euro despite the US stocks plunging to levels not seen since October 1998. The dollar was at 117.21/31 yen up about a full yen from the overnight.

The pound fell one per cent against the US dollar but gained half a per cent against the euro after the single currency slipped below parity with the greenback overnight. Sterling climbed to its strongest since late May against the euro but pulled back two cents below last week’s two-year high against the dollar. It was trading at 63.42 pence per euro, after touching 63.13 earlier, and $1.5640, after dipping to $1.5616.

The euro’s recent rise above $1.00 was sweet revenge after spending most of its brief life racking up losses against the dollar. Just a week and a day after hurdling that psychological level for the first time in 2-1/2 years, the euro was back below parity having slumped 2.25 percent to a low at $0.9845. The European now risks pulling back to the July 5 low at $0.9714 and the 200-week mown” average at $0.9691 before attempting to snap back.

The euro was launched in January 1999 at $1.17, but it steadily ground lower against the dollar, hitting a record low of $0.8225 in October 2000. However, since February 2002 the euro has rallied some 16 cents, or 13 percent, as investor confidence in US assets was hurt by the falling Wall Street stocks and accounting scandals. Its upturned turned steeper in May, ultimately lifting it above dollar parity to peaks above $1.02. At the time parity was hit, many market watchers saw technical and fundamental grounds for the euro to keep rising. The euro has completed five waves during its ruse from 40.8560 on February 1 to $1.0206 on July 19 signalling a reversal is at hand.

On July 24, the dollar failed to benefit from the Wall Street’s powerful rally and instead backtracked on the previous day’s solid gains as investors’ faith in corporate American remains circumspect. In late New York trade, the euro retested session highs of 99.82 cents, to trade near 99.45 cents, stilt a gain 0.51 percent compared with previous day’s New York close. the euro is rough 2-1/2 cents below last week’s 2-1/2 year high. The dollar held midway between its session high of 117.58 yen and low of 115.88 yen. In late trade, the dollar bought 116.70 yen, 0.70 per cent less than the day before.

The pound rose more than half a per cent against the dollar as the greenback gave back ground against the euro. But sterling was broadly steady against the euro, even when the British pound rose against the dollar as deafens anticipated a poor Wall Street open. A recovery in the US stocks pushed the pound off its highs. The pound was trading at $1.5718, off a high of $1.5791 hit earlier. It hit a two-year high against the dollar test week at $1.5854. Against the euro the pound was unchanged at 63.15 per euro.

The dollar surrendered some ground on July 25, failing to cash in on a big overnight rally in the US share prices as players were wary of writing off Corporate America’s troubles after the recent accounting scandals. But falls were limited since many traders were nervous about taking fresh positions after a week of heavy volatility. It was fetching 116.30 yen off a morning high of 116.70 and below the late New York level of 116.45. The euro was hovering near parity at 99.84 cents against 99.43 in the late US trade. The single currency was roughly flat at 116.16 yen against late US levels.

Sterling rose a third of a per cent against the dollar as it followed the euro higher but fell back by the same amount against the single currency, weighed by much weaker than expected British retail sales data. It was trading at $1.5770, up on the day but down from a two-year high of $1.5854 hit last week. Against the euro, it fetched 63.45 pence.

The euro got the last dip on the dollar as the two currencies danced around the parity level on July 25 while investors ignored a volatile US stock market and focused on the underlying factors for the greenback’s downtrend. The dollar gained more than one yen in Tokyo at the close of the week on July 26, as US fund operators sold off Japanese and other Asian stocks to make up fore equity losses at home and converted the cash into dollars.

The dollar hovered around the day’s high of 117.66/69 yen more than a full yen up from 116.57/65 in late New York trade. The single currency strengthened against the yen, to 117.69/75 yen from previous day’s 116.94 yen. But it softened against the dollar, slumping below parity to $0.9989/94 against $1.0035.