September 23, 2002	Monday	Rajab 15, 1423

THE RUPEE remained firm in relation to dollar in the inter-bank market throughout the week. After gaining 8 paisa on September 17, the rupee-dollar parity remained unchanged at Rs59.18 and Rs59.20 in the absence of buying interest and continued dollar selling by exporters. There was demand for dollar but easy supply of dollar in the local market and dollar’s downtrend in the international market released pressure on rupee.

The dollar also showed modest demand in the kerb, but sufficient dollar supply, as a result of increased inflow of remittances from the Pakistanis expatriates and the mounting foreign exchange reserves with the State Bank of Pakistan, kept rupee dollar parity intact. The dollar, however, continued to slide and lost 8 paisa against the rupee on the first three days of the week, helping the rupee to extend its gain. It was only on September 19, the demand for dollar picked up in the local market, which pushed rupee down by 8 paisa to trade at Rs59.13 and Rs59.18 against the dollar.

The euro started the week on a weak note but it soon recovered from the previous week’s weakness and started firming up versus the rupee on rising demand. After touching the week’s lows at Rs56.85 and Rs57.15 on September 17, the euro gained 60 paisa over the rupee in the following two days and traded at Rs57.80 and Rs58.10 on September] 19.

It gained another 20 paisa against the rupee on September 20, exceeding Rs58 mark towards the close of the week and traded at Rs57.95 and Rs58.30. The rupee lost 60 paisa against the euro during the week.

Against other major currencies, the rupee at the inter-bank forex counter gains further strength against the Japanese yen, the Singapore, Hong Kong and New Zealand dollar, the Chinese yuan, the Saudi and Qatari riyals and the UAE dirham. It also managed to gain strength over the Australian dollar and the Malaysian ringgit. The rupee however, lost ground versus the British pound, the Canadian dollar, the Swiss franc, the Danish and Norwegian krones and the Kuwaiti dinar.

With the dollar’s continued weakness in local as well as international market, no major development is expected in the currency market, where rupee dollar parity is likely to move both ways in a narrow band currently dollar in the kerb is 7 paisa lower than in the inter-bank and euro is in demand in the local market and has gained over the rupee in the past one week, it is still 117 paisa lower than the dollar.

In the international financial market, the yen fell to three-month lows against the dollar day on September 16, amid speculation that the Japanese officials may agree to guide the yen lower in an effort to jump-start the sluggish Japanese economy. Extending previous week’s gains, the dollar shot up to 122.47 yen in the European trade setting a 12-week high, before drifting back to close at 122.20 yen in the late US trade, up nearly 0.50 percent from the previous US close. The single currency gave up most of those gains to close at 118.45 yen in New York, up 0.10 per cent.

The pound fell across the board marking the 10th anniversary of its forced ejection from the European exchange rate mechanism with losses against the dollar, euro and yen. Sterling’s slide started early, taking knocks from a broadly stronger dollar, which pulled the pound to its lowest level in over two weeks against the greenback of $1.5403. Sterling was down half a per cent at $1.5450. The pound started fairly steady against the euro but by late European trading it was down almost half a per cent at 62.91 pence. The pound was also lower versus the yen, trading at 188.40, having hit its highest level since April near 190 last week.

On September 17, the dollar rose to its strongest level in three months against major currencies after Iraq said it would allow international weapons inspectors into the country helped abate market concerns about an imminent US military strike. Initially, the news sparked a relief rally in global equities, increased demand for dollars and sent oil prices plunging. But the US greeted Iraq’s proposal with skepticism, and still insists on a UN resolution that would leave room for a military strike should Iraq fail to disarm completely.

After falling as far as 96.08 cents in offshore trading - its lowest since June 20 - the euro staged a rebound near 96.50 in the early US dealings, still off 0.40 per cent from its prior close. The dollar bought 122.90 yen, well below its London trading high near 123.50 yen but still up 0.55 per cent from its prior US close. Versus the Swiss franc, the dollar edged off its highs to stand near 1.5270 francs, up 0.60 per cent on the day and its strongest since June 20.

Sterling fell to three-week lows against the dollar as easing worries over a US war with Iraq boosted the greenback across the board and the benign UK inflation data reinforced expectations rates would remain low. Sterling fell as low as $1.5285, its lowest level since August 27, but pared its losses to $1.5346 by the late European trade as the dollar gave back some of its broad-based gains following disappointing US industrial output figures.

On September 18, the dollar firmed to a session high of 123.10 yen after the Bank of Japan said it would consider buying shares from the Japanese banks, sparking fears that the credibility of the central bank may be in danger.

The dollar was at 122.62 yen against previous day’s late US level of 122.08 yen. The euro slipped to 96.96 cents from 97.39 in late New York. The single currency was unchanged at 118.95 yen. The dollar came under light selling pressure against the yen after the weak US data and the Wall Street slide but kept its losses to a minimum as many players - expecting a further rise — bought on dips.

The British pound shuttled in familiar ranges. The pound was little changed at 63.12 pence per euro in the late European trade but tracked the single currency slightly higher against the dollar as the US stocks markets opened with heavy losses. Sterling stood near session highs at $1.5460 up almost two cents from three-week lows set early September 17.

The yen struggled to extend gains in Asia on September 19 as the market struggled to grasp the ramifications of the bank of Japan’s decision to buy stocks from Japanese banks. The BoJ’s unprecedented move boosted the Tokyo share prices but raised concerns about asset deterioration at the central bank and a possible loss of the BoJ credibility. The yen came under slight pressure in the afternoon as the holders of long positions unwound them after a speech by the prime minister proved disappointing, containing little that was new in terms of measures to boost the economy.

The dollar was at 121.69/75 yen against 121.93/01 in the late US trade. It fell as low as 121.35 yen in the morning. On September 18, after the BoJ”s announcement, the greenback briefly shot up to 123.10 yen on fears that the BoJ’s credibility as the defender of the Japanese currency would be hurt.

Sterling gained ground against the dollar but gave way to the broadly firmer euro as the losses on Wall Street pressured the greenback across the board. Sterling had risen to $1.5544 from $1.5502 in late New York.