October 20, 2003	Monday	Sha'aban 23, 1424

After touching 3-month high versus the dollar last week, the Pakistani rupee came under renewed pressure in the inter-bank market on emerging dollar demand from the importers. The parity assumed downtrend.

However, sufficient dollar inflows prevented any major decline in rupee value. On October 13, the market recorded a marginal decline of one paisa in rupee value against the dollar. At the end of the week, the dollar was seen changing hands at Rs57.48 and Rs57.50. Rupee’s weakness persisted against dollar throughout the week. On October 16, the dollar in the inter-bank market traded at Rs57.53 and Rs57.55 after 5 paisas loss in the rupee value in three days. However, towards the close of the week on October 17, stability prevailed in the inter-bank market, where the rupee resisted further fall versus the dollar. The parity stood unchanged at its overnight level as banks remained in the sidelines in the absence of major payments. During the week, the rupee, however, shed six paisas against the dollar.

In kerb trading, the week commenced with rupee remaining unchanged at Rs57.60 and Rs57.70 against the dollar on October 13. However, the rupee failed to maintain its week long firmness on October 14, and shed 5 paisas to trade at Rs57.65 and Rs57.75 against the dollar following an increase in dollar demand. It further lost 5 paisas for buying on October 15, and traded at Rs57.70, while it continued unchanged for selling at Rs57.75. On October 16, there was extended fall in rupee value for selling, which lost 10 paisas to trade at Rs57.85 against the dollar. The local currency has also shed 5 paisas for buying at Rs57.75. There was a cumulative loss of 15 paisas in rupee value against the dollar in four days trading. On October 17, the dollar traded unchanged amid dull activity in the market. The declining trend in rupee value in the kerb is attributable to the rise in dollar demand ahead of Ramazan.

Euro remained volatile but the rupee/euro parity moved both ways in a tight range during the week. The rupee shed 5 paisas on the opening day against the euro to trade at Rs67.70 and Rs67.90 on October 13, but then managed to recover on October 14 and gained 100 paisas to trade at Rs66.70 and Rs66.90 against the euro. On October 15, the rupee once again lost 70 paisas and traded at Rs67.30 and Rs67.60 versus the euro. However, it manage to recover 40 paisas on October 16 and traded at Rs66.90 and Rs67.20. The rupee further gained 15 paisas on October 17 with the European single common currency trading at Rs66.75 and Rs67.05. During the week, the rupee gained 90 paisas over the week.

Against other major currencies, the rupee at the inter-bank forex counter extended losses versus the British pound, the Canadian, Australian dollars, the Malaysian ringgit, Saudi and Qatari riyals and the UAE dirham. It remained unchanged against the Chinese yuan but displayed strength against the Swiss francs, the Swedish krona, the Danish and Norwegian krona, the Hong Kong, New Zealand and Singapore dollars, the Japanese yen, the Kuwaiti dinar, the Korean won and the Thai bhat.

In the international financial market, the US dealings were marked by a holiday, a lack of economic news or data and scant trading volumes, all of which aided the dollar’s recovery amid profit-taking in euros. The G-7 statement calling for more flexibility in exchange rates was widely perceived by the currency market as a demand that Japan and China stop intervening in markets to weaken their currencies in support of their export markets. The call pushed the yen to three-year highs against the dollar.

The euro, swept up in a frenzy of dollar sales, earlier this month had risen to within one cent of its record high of $1.1932 hit earlier in the year. But the ECB President’s clarification sent the single European currency down by more than one per cent against the dollar and the yen. The euro last week had vaulted to its highest since mid-June against the dollar. In New York trade, the euro was down 0.9 per cent to $1.1692.

On October 13, the dollar rose 0.3 per cent against the yen to 108.93 yen. Against the Swiss franc; the dollar was at 1.3241 francs, up 0.9 per cent on the day. The pound was up 0.1 per cent at $1.6668. The euro slipped through a support level near $1.1740, then triggered a series of stop loss orders on the way down to session lows around $1.1654, before making a partial recovery.

On October 14, the dollar shed much of its earlier broad gains after the US stock markets inched down from their highest levels in over a year, removing some of the impetus behind the dollar rally. Earlier the dollar had rallied across the board, hitting one-week highs against the euro and the yen, as the US earnings optimism prompted a rebound in the greenback after seven straight weeks of decline.

In New York trade, the euro was flat on the day at $1.1706. the dollar maintained gains against the yen, trading at 109.37 yen up 0.4 per cent on the day, but off session highs of 110.25 yen. The dollar slipped to 1.3209 Swiss francs down 0.1 per cent on the day. The pound rose to $1.6686 up 0.2 per cent. The greenback leaped more than one percent to its session highs against the yen, as speculative traders scrambled to exit long yen/short dollar positions. The market remains nervous about the possibility that Japan could step in with further yen-weakening intervention.

On October 15, the dollar climbed against major currencies as a sharp upward revision in August in the US retail sales and a bullish New York state survey renewed hopes of robust growth in the United States. But analysts warned that sentiment on the dollar remained bearish and viewed the greenback’s rally as a minor pullback from a long-term declining trend. The economic data were enough to freeze the dollar’s ranges but overall, the dollar will remain under pressure.

In New York, the euro was down 0.83 per cent against the dollar at $1.1633. The euro also fell against the yen to 127.37 yen. The dollar rose around 0.6 per cent against the Japanese currency to 109.51 yen and climbed one per cent against the Swiss franc to 1.3302 francs. The pound, meanwhile, dropped 0.3 per cent to $1.6669. Against the Canadian dollar, the greenback rose 0.15 per cent to $1.3260 as the bank of Canada kept key interest rates unchanged.

The British pound went into reverse against the dollar pulling back from near four-month peaks as strong regional US manufacturing data gave the greenback a fillip across the board. The dollar’s rally pushed sterling back to $1.6655 but allowed it to extend its rally beyond 69.70 pence per euro to its highest level in over a week.

On October 16, the dollar rallied against major currencies amid a technical rebound that was supported by fairly strong economic data, conveying the image of a US economy shoring up its foundations. But dollar gains were tempered by nervousness ahead of President George W. Bush’s visit to Asia for the Asia-Pacific Economic cooperation (Apec) summit and his meeting with Japanese Prime Minister Junichiro Koizumi.

In the late US trade, the euro fell 0.36 per cent to $1.1587. The euro’s losses also pulled it lower against the yen, dropping to 127.25 yen. The dollar climbed 0.3 per cent to 109.83 yen. Against the Swiss franc, the dollar was up 0.36 per cent at 1.3353 francs. However, sterling rose 0.3 per cent against the dollar to $1.6674. The greenback also lost 0.7 per cent of its value against the Canadian dollar to C$1.3180, but rebounded slightly from a 9-1/2-year low of C$1.3135 touched earlier in the session.