September 15, 2003	Monday	Rajab 17, 1424

This week the dollar came under pressure against major currencies in the international market due to excessive selling and failed to show any significant direction. At the same time, the State Bank of Pakistan continued strict monitoring of the local forex dealers.

These two factors restricted any major rise or fall in rupee/dollar parity in the local currency market during the week under review. In the inter-bank market, the rupee managed to remain firm in the absence of fresh demand. After opening the week on a slightly dismal note, shedding 2 paisa over the previous week close to trade at Rs57.77 and Rs57.79 against the dollar on September 8, the parity ruled almost stable amid steady trading volume. Sufficient dollar inflows in the absence of any major payments demand kept the parity range bound in the following four days with the rupee gaining 4 paisa for buying and 5 paisa for selling. At the close of the week, the rupee maintained its winning streak in the inter-bank market and traded at Rs57.73 and Rs57.74 against the dollar, up 3 paisa for buying and 4 paisa for selling over the previous weekend’s level of Rs57.76 and Rs57.77.

In kerb trading, on the other hand, the rupee opened the week with 10 paisa gain for buying and only 5 paisa gain for selling versus the dollar to trade at Rs58.05 and Rs58.15 on September 8. But then the parity showed a stable trend in the remaining week on improved dollar supply and lack of buying interest. The week closed with the rupee remaining stable for buying but gaining 5 paisa for selling to trade at Rs58.05 and Rs58.10 against the dollar. When compared with previous weekend close, the rupee on September 12 was up by 10 paisa against the dollar.

Against the euro, the rupee continued to remain under pressure. Though the rupee opened the week with a gain of 30 paisa for buying and 25 paisa for selling at Rs63.95 and Rs64.15 on September 8, it lost 60 paisa for buying and 70 paisa for selling in the following 3 days and traded at Rs64.65 and Rs64.85 on September 11. The week, however, closed with a 45 paisa gain in rupee value on September 12, when the euro traded at Rs64.20 and Rs64.40, up only 5 paisa over the previous weekend level.

Against other major currencies at the inter-bank forex counter, the rupee extended further losses versus the British pound, the Canadian, Australian and New Zealand dollars, the Swiss franc, the Swedish krona, the Danish and Norwegian krones and the Kuwaiti dinar. It gained over the Japanese yen, South Korean won and Thai bhat. The rupee was unchanged against the Chinese yuan, the Malaysian ringgit, the Saudi and Qatari riyals and the UAE dirham.

In the international financial market, the dollar rose against most major rivals on September 8 in fairly sluggish trading as investors took direction from bullish equities in the absence of market-moving economic news. But the greenback failed to sustain a two-week high against the yen hit after Japanese authorities were cited once again selling their currency for the greenback. While relative growth fundamentals still favour the dollar in the medium term, analysts say the temporary dent to economic sentiment in the United Stated after a dismal labour report last week and the shift in the short-term technical bias suggests further euro gains against the dollar.

The dollar was down 0.03 per cent against the yen at 116.72 yen. The euro likewise fell 0.39 per cent against the Japanese currency, trading at 129.34 yen. Against major European currencies, the US unit advanced, buoyed by gains in the stock market on upbeat reports from Wall Street analysts suggesting an economic rebound in the United States is on the way. The euro was changing hands at $1.1068 versus the dollar, down 0.34 per cent. The dollar climbed 0.67 per cent against the Swiss franc to 1.3908 francs. Sterling was also trading lower against the dollar at $1.5824, down 0.37 per cent on the day.

On September 9, the dollar was clobbered troubled by falls on Wall Street and worries over the sustainability of the US economic rebound, following weak US employment numbers in New York, the euro climbed to $1.1231 up 1.5 per cent from previous day’s New York close against the dollar, breaching of key technical level around $1.1212. This triggered some investors to cut their losses and sell dollars for euro. The euro also posted gains against the yen and sterling, benefiting indirectly from the greenback’s weakness across the board. The single currency rose around 1.5 per cent and was roughly 1 per cent firmer against sterling at 70.58 pence. Against the Swiss franc, the dollar fell to 1.3774 francs while sterling traded about 0.49 per cent higher against the greenback at $1.594. The yen, meanwhile, showed traded flat against the dollar, with the greenback nearly unchanged on the day at 116.81 yen. Traders’ suspicions that Japan was buying dollars for yen were cited as one reason the greenback was virtually flat against the Japanese currency. Sterling gained ground from the dollar as global currency influences overshadowed UK data showing a sharp fall in the country’s trade deficit. It was at $1.5900, up nearly half a per cent from the previous day’s close but lagging the euro, which was more than one per cent up against the US currency.

On September 10, the dollar edged higher against some major counterparts but market sentiment stayed bearish, with investors unsure that the US economic rebound is on a sustainable path. The euro declined to $1.1203 against the dollar, down 0.2 per cent, after trading below $1.12 earlier. Against the yen, the single European currency rose to 131.19 yen up 0.05 per cent. The euro also got a minor lift after European Central Bank President Wim Duisenberg said euro zone interest rates are appropriate at 2 per cent - indicating no rate cuts are expected in the foreseeable future.

Against the Swiss franc, the dollar was trading higher at 1.3839 francs up 0.45 per cent. Sterling, meanwhile, was trading up 0.08 per cent against the US currency at $1.5926. The dollar held its gains against the yen, up 0.2 per cent at 117.07 yen on suspicions the Bank of Japan intervened in the foreign exchange market. There has been much BoJ intervention at 116.20 yen, with some buying from Japanese agency banks.

Sterling edged up to a three-week high against the dollar but remained near one-month lows versus the euro, finding no momentum of its own in a market dominated by doubts about the US economy. The pound’s slight rise versus the dollar was mainly a follow though from previous day’s gains of almost 1-1/2 cents - as the greenback fell across the board. Markets were focused on the greenback’s slide against the euro after a worse than expected US jobs report last week offered investors a reason to take profits on dollar positions and await further progress reports on the economic recovery.

The pound was off the day’s peak of $1.5946, its highest since August 20, and trading at $1.5905. Against the euro, sterling was trading at 70.40 pence, just a touch firmer from late New York levels but still near overnight trough of 70.68 pence, the pound’s worst level s since August 12. The pound has largely shrugged off the week’s main UK data, showing strong industrial production in July and a lower than expected trade deficit that month as well.

On September 11, the dollar advanced against some currencies in fairly volatile trading due partly to some short-covering, with a surge on Wall Street helping to offset a raft of downbeat US economic data. Weaker-than-expected US weekly jobless claims and a worsening US trade gap - indications the US recovery still has significant soft spots - sparked a sharp, but short, sell-off of the dollar that pushed the euro back toward a four-week peak reached during European trade.