October 28, 2002	Monday	Sha’aban 21,1423

Stability prevailed in the currency market where trading activities remained thin during the week. Due to the lack of interest among investors, the demand for dollar was persistently low, while its supply improved continuously led by increasing inflows from Pakistani expatriates. In the inter-bank market, the rupee/dollar parity stayed intact during the week.

The market opened the week at Rs59.0 and Rs59.01 on October 21 with rupee down by 5 paisa from the previous weekend close, but after gaining 5 paisa on two consecutive days, the parity reverted to its previous weekend’s levels of Rs58.95 and Rs58.97. The week concluded with the dollar changing hands at Rs58.95 and Rs58.97.

In kerb trading, the rupee/dollar parity remained almost unchanged throughout the week amid slight fluctuations in the absence of dollar demand. The parity stayed intact at Rs58.95 and Rs59.05 for second consecutive week. Euro also followed a similar trend. It remained fluctuated in 20 paisa range, but the parity remained intact at Rs57.40 and Rs57.70.

Against other major currencies rupee at the inter-bank forex counter lost ground versus the British pound, the Canadian, Australian, New Zealand and Singapore dollars euro, the Swiss franc, the Dansish and Norwegian krones, the Swedish krona, the Japanese yen and the Kuwaiti dinar. The rupee, however, continued to show strength over the Saudi and Qatari riyals, the Malaysian ringgit, the Hong Kong dollar and the UAE dirham. It was unchanged against Chinese yuan.

The rupee/dollar parity is likely to stay firm in the coming week. No major development is expected. The government expects remittances to top $3 billion this year. First quarter estimates are already around $1 billion. Foreign exchange reserves are also in comfortable position. These have reportedly exceeded $8 billion. Exports are also up. These have already risen by 14 per cent in the first quarter. In such a situation, dollar demand is likely to remain low with the rupee maintaining its firmness over the dollar. The State Bank will continue to extend support to dollar, restricting further fall.

On the international front, a stock market rally on October 21 did not help the dollar sustain a four-month high against the yen and a one-month peak against the euro, but uncertainty over the Europe’s strict budget rules kept major currencies range-bound. On the Wall Street, the Dow Industrials rose 2.59 per cent, the Nasdaq Composite rose 1.69 per cent; and the S&P 500 gained 1.73 per cent. The rising risk appetite of investors has helped give commodity currencies a boost.

Last week, the euro set one-month lows after the European Commission President said the inflexibility of the European Union’s budget pact was “stupid”. The US dollar fell to a six-week low of C$1.5633 against the Canadian dollar, a loss of 0.63 per cent. The Australian dollar rose to a three-month high against the greenback, touching 55.50 cents. The US dollar fell to 10.19 rand, an 11-week low versus the South African currency.

The dollar held at 124.95 yen, off an earlier high of 125.65 yen its best since mid-June and a resistance marking its 200-day moving average. The euro briefly slipped to 96.86 cents - the lowest mark since mid-September - but recouped to 97.36 cents from 97.11 in pre-weekend New York.

Sterling eased by late European trade against the euro as the single currency was buoyed slightly by a weekend referendum in Ireland that will help keep the European Union’s expansion plans on track. A weak start on the Wall Street also helped the euro gain momentum against the dollar and outpace the pound on a day of little sterling-specific news.

The euro was about a quarter per cent higher on the day at 62.98 pence, pulling back from last weekend’s 11-day lows around 62.48. The pound was also a fractionally firm on the day at $1.5466, up from a one-month low of $1.5428.

On October 22, the yen fell after the Japan’s economy czar, Heizo Takenaka, delayed releasing an interim report on how to clean up Japan’s crippling bad debt problem, while the weak US stocks pressured the dollar lower. The dollar slipped back from the resistance at 200-day moving average of 125.61 yen to trade up by 0.17 per cent on the day at 125.10 yen. On October 21 the dollar hit a four-month high of 125.64 yen.

The euro climbed to a new session high of 122.52 yen before slipping back to 122.31 yen, up 0.61 per cent on the day. Last week the euro reached a three-year high of 123.03 yen.

Sterling drifted higher against the stocks-weakened dollar and eased a touch versus the euro as the US equities story held sway over a market temporarily low on sterling-specific news. The pound was a third of a per cent firmer on the day at $1.5469 - up from a one-month low of $1.5405 set a day earlier - as the greenback retreated in the face of a weak session on the Wall Street. Sterling was a touch lower versus the euro on the day at 63.21 pence - having pulled well back from last week 11-day highs around 62.48 - as the single currency’s gains against the greenback outpaced those of the pound.

On October 23, the yen was broadly firmer after the Japan’s prime minister said economic reforms were on track, prompting investors to buy back yen sold off a day earlier. The single currency shrugged off grim euro zone data and bickering over the European Union rules to run up within half a yen of 3-year peaks set a week earlier near 123 yen.

The dollar fell to one-week lows at 123.85 yen, before recovering to trade around 124.15 yen in midday New York, down 0.75 per cent from the previous US close. On October 22, the yen dipped near recent 4-month lows at 125.64 per dollar. The euro, which had made the most headway against the yen in the previous session, fell to nearly one-week lows near 121 yen earlier. In midday US trade, the euro was back up near 121.35 yen, but still down more than 0.75 per cent against the Japanese currency.

The pound was steady shrugging off news that three members of the bank of England’s Monetary Policy committee voted to cut rates earlier this month as dealers awaited key data on Britain’s economy later in the week. With the market still unsure whether to reward currencies for higher or lower interest rates, the pound steered a steady course around $1.5475 and retained a firm footing at 63 pence per euro.

On October 24, the dollar fell suffering under the weight on falling US stock prices while the yen hewed to narrow ranges as dealers took to the sidelines amid deep uncertainty over the Japan’s long-delayed banking reform. The yen retreated from four-month lows versus the dollar and a three-year nadir against the euro, as investors’ fears waned that the Japanese political opposition would derail bank reforms, seen as critical to a Japanese economic recovery.

The dollar held in a 96 cents to 99 cents range against the euro established last summer. The market shrugged off a bigger than expected decline in the US weekly jobless claims of 25,000 to a total of 389,000. The euro also found little cheer from the German regional data indicating price pressures in the euro zone’s biggest economy waned in October.