January 20, 2003	Monday	Ziqa'ad 16, 1423

The rupee/dollar parity maintained its stable trend amid minor fluctuations. Strong corporate demand at the start of the week, however subsided towards the end of the week.

Sufficient dollar supply as a result of heavy inflow of workers remittances and exporters selling helped the rupee to make up early losses. On the other hand, the SBP support to dollar did not allow the American currency to lose ground despite its persistent weakness in the international market.

In the inter-bank market, the rupee opened the week on a negative note and shed 5 paisa versus the dollar to trade at Rs58.23 and Rs58.24 on January 13. In the following four days it gained 15 paisa helped by excessive dollar supply. The rupee, which was quoted at Rs58.08 and Rs58.10 a dollar on January 16, ended the week slightly lower after changing hands at Rs58.09 and Rs58.11 on January 17. It reflected 8 paisa gain for buying and 11 paisa gain for selling versus the previous weekend’s level.

In the kerb, lack of demand for dollar kept the parity in low tone. It did not show any major change over its previous weekend level and remained intact at Rs58.10 and Rs58.20 for two days. The rupee, while maintaining its buying rate unchanged at Rs58.10, gained 5 paisa for selling to trade at Rs58.15 on January 16. At the close of the week on January 17, the rupee gained 5 paisa and traded at Rs58.05 and Rs58.10. Open market wore a dull look throughout the week.

The euro in the kerb remained fluctuated throughout the week. Most investors preferred investing in euro, which has crossed Rs62 mark. During the week the rupee lost 100 paisa versus the euro. The loss has however, been offset by a cumulative gain of 50 paisa. The gains were recorded on January 13 and January 15, which helped the rupee to touch its highest level at Rs61.05 and Rs61.35 against the euro during the week. The euro however, crossed Rs62 barrier towards the close of the week as the rupee lost 55 paisa in single day trading and traded at Rs61.85 and Rs62.15 on January 17.

Against other major currencies at the inter-bank counter, the rupee lost ground versus the British pound, the Canadian, Australian, New Zealand and Singapore dollars, the Swiss franc, the Japanese yen, the Danish and Norwegian krones, the Swedish karona and the Qatari riyal. It however, gained ground versus the Saudi riyal, the Kuwaiti dinar, the UAE dirham, the Chinese yuan and the Malaysian ringgit.

In the international financial market, the dollar finished narrowly mixed on January 13 after a listless day characterized by position squaring after last week’s US payrolls data. The dollar got some early help from the US stocks, but that rally fizzled by the end of the day, leaving investors with little reason to buy dollars. Even signs that the US was softening its position toward North Korea had little impact on trading. The US said it was willing to consider helping North Korea resolve its energy crisis if the current standoff over its nuclear plans could be resolved.

The dollar had fallen to fresh three-year lows against the euro and four-year lows versus the Swiss franc last week as poor US economic data unnerved investors already worried about the possibility of a US-led war with Iraq and North Korea’s quitting of a nuclear non-proliferation pact. On January 13, the euro slipped about a third of a per cent against the dollar to $1.0536 giving back roughly half the gains it put last weekend after the US Labour Department reported a sharp drop in payrolls in December. The dollar also recouped some of last weekend losses to the Swiss franc, rising 0.45 per cent to 1.3862 francs.

Sterling hovered a cent away from last week’s three-year peak against the dollar as the battered greenback won some respite ahead of key economic and corporate news later in the week. But the pound struggled to recoup lost ground against the euro as dealers awaited British industrial production figures, after data last week cast doubt over the strength of British consumer demand.

The British currency stood at $1.6060 in late London trade, having risen as high as $1.6163 last week. It was also steady at 65.70 pence per euro, having fallen to its lowest level since September 1999. The pound showed little reaction to earlier data showing the cost of raw materials in Britain rose at its fastest pace in more than two years in December due to a surge in oil prices.

On January 14, the dollar fell to fresh three-year lows against the euro and four-month lows versus the yen on reports the UN weapons inspectors found evidence Iraq had smuggled arms-related goods. Tensions over Iraq have hurt the dollar as investors seek the relative safe haven of the Swiss franc and other currencies cushioned by current account surpluses. The United States has a large current account deficit.

It fell as far as $1.0599 per euro, its lowest since October 27, 1999, and 1.3791 Swiss francs before cutting losses later in the session, helped by a rebound in US stock prices. The euro was at $1.0551, up 0.11 percent on the session and still a four-year high. The dollar was flat against the Swiss franc at 1.3861 francs. Options-related selling of euros near $1.06 helped stem the single currency’s rise. The $1.06 level looks like a tough level for euro/dollar. Against the yen, the dollar slid more than 1 per cent to a low of 117.53 yen blowing through a key low of 118.30 yen touched on December 30. It pared losses later to close at 118.11 yen, a decline of 0.66 per cent on the day. The dollar already was under pressure when retail sales data for December gave traders another reason to sell it.

The pound gained more than half per cent on the dollar in Europe and recovered from an early 3 1/2-year low against the euro. Sterling’s fortunes were largely dictated by the yen, with vigorous demand for the Japanese currency pushing the dollar to four month lows and bringing the pound to its lowest against the yen in six weeks. Sterling traded at $1.6084 half a per cent up and slightly below recent three-year highs at $1.6163. It was slightly firmer on the euro from late New York trade at 65.76 pence per euro, after having recovered from a 3 1/2 year low of 66.15 pence against the single currency set in morning trade when the euro was gaining on the dollar. The pound dipped to a six-week trough on the yen at 189.15 before rebounding slightly.

The dollar traded little changed on January 15 against the euro and the yen after teasing recent lows in concert with weak US stocks, but found itself hemmed into tight ranges by the threat of Japanese intervention. The dollar came close to previous day’s three-year low against the euro of $1.0599 and a four-month nadir against the Japanese currency of 117.80 yen, close to where investors think Tokyo will try to weaken the export-crimping strength of the yen.

The euro traded nearly unchanged at $1.0548 euro traders noted technical resistance at $1.0600, where some options-related selling occurred. The dollar edged down to 1.3846 Swiss francs and sterling was unchanged at $1.6049. The dollar’s early drop against the yen reversed course, but not before raising the intervention antennae.

Sterling fought its way back against the dollar in the European trade but remained under pressure against other major currencies from corporate sellers and chart-watching traders. The pound shed nearly half per cent on the euro and set new seven-week lows versus the yen, but was able to claw back on the dollar from earlier losses as the greenback bowed to renewed concerns over geo-political tensions. Traders cited a host of factors souring market sentiment toward the pound, which was one of the worst performing European currencies so far this year, including mixed UK employment data and corporate selling.