THE rupee commenced the week on a positive note and managed to hold its firmness versus the dollar and euro in the inter-bank market and the kerb. Several interventions by the State Bank of Pakistan in the past three weeks kept the dollar from falling further against the rupee amid continued dollar selling. The volatility of euro in the local market also ended as the euro has assumed a downward trend after breaching Rs60 barrier last week.

It is currently trading at Rs58.70 and Rs58.90, down 10 paisa over the previous weekend close, amid fluctuation. Easy supply of dollar, amid lack of demand, has limited the dollar rise over the rupee, while the dollar has managed to restrict its decline against the rupee with the central bank support. Consequently, the rupee dollar parity throughout the week remained intact at Rs59.53 and Rs59.55 in the inter-bank market. In kerb trading the parity was slightly lower than in the inter-bank market. It remained firm at Rs59.40 and Rs59.50. However, in rupee term, the dollar has managed to recover ground versus the euro, though euro, gained marginally this week against the rupee.

At the close of the week, the rupee lost 5 paisa versus the dollar over the overnight level in the kerb to trade at Rs59.45 and Rs59.55, while it remained unchanged at Rs59.54 and Rs59.55 in the inter-bank market. Against the euro, the rupee shed 110 paisa over the overnight level on slight increase in euro demand, which trades at Rs58.70 and Rs58.90 on August 2.

Against other major currencies, the rupee at the inter-bank forex counter showed mixed reaction this week. It maintained its firmness against the Swiss franc, the Danish krone and the Swedish krona but failed to hold ground versus most currencies and extending falls over the British pound, the Canadian, Australian, New Zealand, Hong Kong and Singapore dollars, the Norwegian krone, the Japanese yen, the Chinese yuan, the Malaysian ringgit, the Kuwaiti dinar, the Saudi and Qatari riyals and the UAE dirham.

Currently the market has sufficient dollars amid low demand. This situation is likely to continue in the absence of any major development. However, demand for euro is on the rise. The federal government has also decided to keep 2 to 3 per cent of foreign exchange reserves in euro. This is likely to give slight boost to euro demand in coming weeks amid fluctuations analysts are of the opinion that dollar would soon regain its strength and try to capture the market lost to euro.

In the international financial market, the dollar leaped higher on July 29, hitting three-week peaks against the euro and yen as the US stocks shrugged off the latest accounting scandal and staged a powerful rally. While the dollar made new session highs against most major currencies in response to the higher US stocks, it was already on the way up on news that Japan’s industrial output had fallen for the first time in five months in June as exports to the United States have lost momentum.

At the close of the US trade, the dollar stood at 119.69 yen, a gain of 0.77 per cent on the day and up more than 4 yen from the recent 17-month lows. Dealers said it ran out of steam just short of 120 yen, largely due to the Japanese exporters taking advantage of the stronger dollar to unload dollar receipts. The dollar also rose against the European currencies.

While the dollar’s three per cent gain against the yen in the last few days raised bulls’ expectations for it to rise further, some dealers remained pessimistic about the currency considering the battering it has taken for most of the past four months. The dollar rose as high as 1.19.29 yen, its highest since July 8.

Sterling rose to a two-month high versus the euro underpinned by a survey which showed the British manufacturers think the pound is only a whisker away from the right rate for euro entry. Relatively thin trading saw the pound push to a high of 62.71 pence per euro, brushing aside further evidence Britain’s long-running consumer boom may be drawing to a close. Against the dollar, sterling erased early gains to stand lower on the day after a solid opening on the Wall Street pushed the greenback higher across the board. The pound slipped to $1.5631. from $1.5654 in late New York.

On July 30, the dollar rose to a three-week high against the yen after a powerful rally on the Wall Street helped restore some confidence in dollar assets. The greenback climbed as high as 120.31 yen — its best since July 5 — on buying by the US funds and the Japanese investors looking to unwind hedge positions, but it was soon pushed down to around 120 yen by heavy yen orders from the Japanese exporters. The dollar was quoted at 120.04 yen compared with 119.70 yen in the late US trade. The euro recovered all of its early-session losses to 98.06 cents compared with 98.03 in the late US trade. Against the yen, the single currency rose to 117.75 from 117.42.

Sterling came off its two-month peak versus the euro after a key survey showing a slump in the British consumer confidence reinforced expectations of the Bank of England to keep its rates unchanged this week. But the pound gained ground against the dollar as the Wall Street reversed after a stunning rally in the previous session, pressuring the greenback across the board. The pound had risen to $1.5672 from $1.5629 in late New York on July 29 having spent much of the day trudging along a narrow path around $1.5640.

On July 31, the dollar hit its highest level against the yen in nearly four weeks but then came under new selling pressure as the market got nervous about holding long dollar positions with so many problems in the US. Dealers said firm bargain-hunting would emerge should the dollar fall to around 119 yen, while the exporters are said to be lining up with heavy sell orders above 120.40 yen.

The dollar had slipped to 119.54/60 yen from 120.10/20 yen in the late US trade. During Tokyo’s morning session it had risen to 120.42 yen, its highest level since July 5. The euro stood at 98.26/30 cents versus 98.32/37 in the late US trade. It stood at 117.34/39 yen compared with 118.16 yen in the late US trade.

Sterling pulled back from two-month highs against the euro after a survey showing the Britain’s consumer boom had lost steam encouraged investors to take profits on the pound’s recent gains. It was down 0.4 per cent at 62.70 pence per euro having scaled two-month highs at 62.40 in Asian trade. It was down almost one per cent against a broadly-firm dollar at $1.5570. The dollar showed resilience in the face of the data showing the US economic growth faltered sharply during the second-quarter and began the year at a slower pace than previously thought.

The dollar drifted sideways in Asia on August 1, with many dealers in two minds on whether the US shares can sustain their latest rebound and lilt it further. It was hovering around 119.73/78 yen virtually flat from 119.77 in the late US trade. Bulls were hoped the dollar would soon test a four-week high of 120.41 yen, a break-through, which could take it to 122. But sales by the Japanese exporters above 120 yen are an obstacle for the dollar.

The euro also moved little, and stood at 97.79/82 cents against the late US level of 97.77 cents. The single currency was quoted at 117.18124 yen against previous day’s 117.15/25. Market players said the dollar was helped by a lack of attractiveness by the euro and the yen. The euro and the yen are not attractive enough to draw funds that have escaped the dollar.

Sterling fell more than a per cent against the euro and half a per cent against the dollar unsettled by the weak British many data. It was trading at $1.5557, down half a per cent on the day and near its lowest in two weeks. It fetched 63.10 pence per euro compared with two-month highs around 62.40 hit earlier in the week.

The pound originally slipped against die dollar as it followed the euro lower and continued to be sold against the single currency as well. And then as the dollar fell back against the euro on poor US data, sterling’s losses against the single currency accelerated. At the close of the week on August 2, the dollar lost more ground in Tokyo after the weak US data left players wondering if the world’s biggest economy can easily recover its stability. Pressured by sporadic selling by the Japanese exporters, the greenback fell as low as 118.79 yen more than 1-1/2 yen off its recent high of 120.42 reached on July 31.

It stood at 118.95 yen against 119.35/43 in the late US trade on August 1. But traders said bargain-hunting demand was providing firm support around 118.70-118.80. The dollar fell to a one-week low of $0.9918 per euro in the European trade as gloom over the US economy contrasted with a survey showing euro zone business sentiment unexpectedly improved in July. The greenback has now shed almost two cents from four-week highs scaled early on August 1 and is only three cents away from two-and-a-half year lows plumbed last month. Sterling rose nearly half a per cent against the dollar it was trading at $1.5675, off highs of $1.5725, but around two cents up from previous day two-week lows.