September 22, 2003	Monday	Rajab 24, 1424

The rupee/dollar parity was almost stable amid slight fluctuations during the week. In the inter-bank market the week commenced on a weak note as the rupee slipped two paisa versus the dollar on September 15 and traded at Rs57.75 and Rs57.77 against Rs57.73 and Rs57.75 in the previous weekend.

Increase in dollar demand by local and foreign banks kept the rupee under pressure, which shed another 2 paisa on September 16, to trade at Rs57.78 and Rs57.79.

On September 17, the rupee did not show any major change against the dollar as supply was enough to meet the demand of local and foreign bank. On September 18, continued dollar supply made the parity moved both ways, with the rupee gaining 3 paisa for buying but shedding one paisa for selling. The dollar traded in a narrow range and was available at Rs57.75 and Rs57.80 during the day. Dollar buying by leading banks continued but sufficient supply caused only a marginal decline in rupee value against the dollar which traded at Rs57.80 and Rs57.81 on September 19. Over the week, however, the rupee lost 5 paisa versus the dollar.

In kerb trading, the rupee opened the week on a positive note gaining 10 paisa for buying and 5 paisa for selling. It traded at Rs57.95 and Rs58.05 on September 15 against the previous weekend close of Rs58.05 and Rs58.10. There was no change in the parity on September 16 and September 17 as the SBP’s strict monitoring did not allow any major change, amid low trade volume. On September 18, the rupee in the kerb traded unchanged for selling at Rs58.05 but lost 5 paisa to trade at Rs58.0 for buying. It did not show any change over its overnight level on September 19. The rupee thus registered a decline of only 5 paisa during the week.

Against the euro, the rupee remained under pressure throughout the week. After opening the week with 20 paisa gain at Rs64.80 and Rs64.95 on September 15, it failed to maintain its firmness against the Euro on September 16 and lost 30 paisa to trade at Rs65.10 and Rs65.25. Since than it assumed a falling trend and lost 40 paisa on September 17, 50 paisa on September 18 and 10 paisa on September 19. At the close of the week, the Euro was trading at Rs65.10 and Rs65.30, reflecting a fall of 15 paisa in the value of rupee during the week.

Against other major currencies, the rupee at the inter-bank forex counter remained week versus the Canadian, Australian, New Zealand, Singapore and the Hong Kong dollars, the Swiss franc, the Japanese yen, the Danish and Norwegian krones, the Swedish krona, the Malaysian ringgit, the Kuwaiti dinar, the Saudi and Qatari riyals, the UAE dirham, the Thai bhat and the Korean won. The rupee remained unchanged against the Chinese yuan. The British pound was the only currency against which the rupee displayed strength this week.

In the international financial market, the dollar struggled against some major rivals on September 15, as market sentiment turned negative over investors’ dissatisfaction with a mixed batch of the US economic data. The euro rose against the dollar to $1.1298, up 0.1 per cent after trading mostly weaker in the European session. Against the Swiss franc, the greenback fell 0.06 per cent to 1.3778 francs. Sterling was down 0.09 per cent against the dollar at $1.6013.

The dollar also held firm against the yen at 117.38 yen, with a holiday in Tokyo creating subdued trading conditions. The euro was firmer against the Japanese currency, up 0.1 per cent at 132.68. Sterling hit a one-month high on the dollar and rose briefly versus the euro as markets greeted Sweden’s rejection of the single currency as a sign the UK was unlikely to hold a referendum on the issue any time soon. It traded at 70.40 pence, steady on the day and down from day’s highs at 70.07 pence.

On September 16, the dollar climbed against most major counterparts helped indirectly by the yen’s rally against some European currencies on growing optimism about the Japanese economy. Expectations that the Federal Reserve will upgrade its assessment of the US economy following firmer economic data in the past few months triggered some buying in the greenback earlier. The US currency, however, fell against the yen on the Nikkei’s strong performance overnight after the Bank of Japan raised its view on the world’s second largest economy in its monthly report.

The euro was sharply down 0.95 per cent at $1.1178. Against the Swiss franc, the greenback rose 0.89 per cent to 1.3918 francs. Sterling was down 0.81 per cent against the dollar $1.5878. The dollar declined 0.86 per cent against the Japanese currency at 116.41 yen. The euro fell steeply as well against the yen, down 1.79 per cent at 130.17 yen. Sterling and the Swiss franc were down 1.67 per cent and 1.8 per cent respectively against the yen.

Sterling fell three yen against the Japanese currency, as Tokyo’s stock market rally gained yet more momentum and the Bank of Japan upgraded its outlook on the domestic economy. With the dollar suffering least among the majors at the hands of the yen, sterling was left tracking the euro lower against the greenback. The pound was little changed against the euro at 70.36 pence but was down almost two-thirds of a per cent at $1.5914. Sterling had fallen as far as 185 yen, versus late New York levels of 187.98 and the day’s high of 188.31.

On September 17, the dollar weakened against European counterparts on profit-taking from previous day’s gains, with investors concerned about low US interest rates. But the greenback rose against the yen, with traders attributing the dollar’s advance to profit-taking on the Japanese unit following its steep recent gains, rather than Bank of Japan intervention. The euro was up 0.52 per cent on the day at $1.1234. Against the Swiss franc, the greenback fell 0.49 per cent to 1.3826 francs. Sterling gained a sharp 1.07 per cent against the dollar at $1.6045 after minutes from the Bank of England’s rate meeting in early September showed some policy-makers starting to look for an interest rate rise.

The pound gained one per cent on the dollar recouping all its looses of the previous day after minutes from the latest Bank of England meeting showed some policymakers contemplating a rate rise. The pound rose to $1.6036, entirely reversing losses of nearly one per cent against the dollar on September 16. The pound also climbed half a per cent on the day to 69.98 pence per euro, although it had pulled back from the session’s high of 69.88.

On September 18, the dollar stayed glued near 116 yen due to intervention concerns, while its topside was capped by persistent yen-buying by exporters and non-Japanese players. Many Japanese exporters have started lowering their exchange rate targets given the recent rise in the yen and placed dollar-selling orders above 116.50, capping the greenback’s upside. But major currencies floated in narrow ranges as operators were careful about taking new positions before the Group of Seven (G-7). The greenback rose as high as 116.55 yen in post-Asian trading due to nervousness ahead of the G-7 meeting but later fell to 115.85 yen. The single currency was at $1.1272/75 against $1.1284/88 in late New York. But it was sharply above a low of $1.1138 hit less than 24 hours ago.

Sterling hit a 1-1/2 month high against the dollar and 1-1/2 week peak on the euro after data showing an unexpected rise in the UK retail sales and encouraging comments from the Bank of England on growth. Sterling had risen to $1.6215, up two thirds of a per cent on the day. Against the euro it had risen to 69.68 pence from 70.09 in late New York.