12 January 2004	Monday	19 Ziqa'ad 1424

The rupee-dollar parity showed a stable trend in the local currency market this week. It did not fluctuate much in the inter-bank market after opening the week on a negative note on January 5, shedding only one paisa amid quiet trading.

The dollar traded at Rs57.42 and Rs57.44 during the day. On January 6, the rupee maintained its overnight levels versus the dollar for buying at Rs57.42 but gained one paisa at Rs57.43 for selling despite the persistent demand for dollar.

Trading activity on January 7, was range-bound in the interbank market as rupee stood firmly versus dollar for buying and selling at Rs57.42 and Rs57.44, respectively, after one paisa decline in the selling rate. The rupee held its overnight levels versus the dollar on January 8, with the dollar changing hands at Rs57.43 and Rs57.44. It did not show any improvement in its overnight levels amid persistent demand for dollar.

Heavy pressure on buying kept the rupee in minus column in the interbank market toward the close of the week, which caused the rupee to shed three paisas versus the dollar trading at Rs57.46 and Rs57.47 on January 9. Payment requirements by banks forced the rupee to give up its firmness versus the greenback. Over the previous week close, rupee in the week under review posted a loss of five paisas for buying and four paisas for selling.

In kerb trading, the rupee on January 5, extended its weekend's slide versus the dollar, losing three paisas for buying but eight paisas for selling to trade at Rs57.45 and Rs57.55. The parity rates came under pressure as the banks' demand for dollars increased. According to leading currency analysts, in the current month, the government has to pay nearly one billion dollars of loan which caused a modest fall in rupee value.

The dollar demand was also high as it was the first day after long holidays in the international markets due to Christmas and the New Year. On January 6, the rupee showed a mixed trend versus the dollar changing hands at Rs57.47 and Rs57.52.

On January 7, the rupee maintained its overnight levels in kerb market versus the dollar for buying and selling at Rs57.47 and Rs57.52. On January 8, the rupee maintained its prevailing levels in relation to the dollar for buying but lost three paisas for selling to trade at Rs57.45 and Rs57.55. The market noted that there was no let up in banks' dollar buying for heavy payments. The rupee maintained its overnight levels versus the dollar at Rs57.45 and Rs57.55 on January 9.

Over the previous week end, the rupee showed a depreciation of three paisas for buying and eight paisas for selling. Heavy payments by the government of Pakistan in January, 2004, and a slight fall in the remittances, probably, were leading reasons for the rupee's decline in relation to dollar.

The euro's appreciation in world markets was mirrored in the kerb market as it seemed that the single European currency was again on the way to break new barrier of Rs73. The euro gained 35 paisas versus the rupee on the week's opening day to trade at Rs72.36 and Rs72.65 on January 5. It hit a new high at Rs73 on January 6, changing hands at Rs72.85 and Rs73.15, after picking 50 paisas.

Due to surging demand for euro in world markets, this was the second consecutive week when it crossed the barrier of Rs73 in the local market. Since the start of the week the rupee has lost nearly 90 paisas versus the euro.

On January 7, falling trend in the euro value globally pressurized the single European currency to surrender its overnight gains in the kerb market which helped the rupee gain 25 paisas at Rs72.60 and Rs72.90.

On January 8, the single European currency failed to maintain its supremacy in the world markets, too, as it fell sharply due to the lack of buying interest. It came under pressure versus rupee in the kerb market, shedding 60 paisas more to trade at Rs72.10 and Rs72.30.

The euro gave up its overnight weakness versus the rupee, recovering about one rupee worth at Rs73.02 and Rs73.30 for buying and selling, on January 9. At the end of the week the rupee showed a depreciation of 100 paisas against the euro over the previous week end.

In the international financial markets, on the week's opening day, the dollar hit a record low versus the euro and reached a three-year nadir against the yen on January 5, as prospects for the continued low US interest rates dulled investors' appetite for the currency. In late New York trading, the euro was up 0.65 per cent at $1.2664 but down from the record high $1.2695 reached earlier.

The dollar fell 0.75 per cent to 106.23 yen after trading at a new three-year low of 106.06 yen. Japanese and speculative names were selling dollars for yen, even though the market was wary of the Japanese intervention after suspected yen-selling action in the Asian trading hours.

The dollar dipped 0.43 per cent to 1.2333 Swiss francs. Sterling gained 0.76 per cent to $1.8063. The British pound surged above $1.80 for the first time in over 11 years as dovish comments from a Federal Reserve official put the beleaguered dollar under further pressure. The dollar's latest tumble came after the Federal Reserve Governor said there was little risk of a crisis stemming from the dollar's fall and no immediate reason to raise the US interest rates from 45-year lows.

Sterling rose three-quarters of a per cent to a high of $1.8069 in late London trade, bringing its gains to 14 cents in less than two months. Sterling is now at its highest against the dollar since September 1992, the month Britain withdrew from the European Exchange Rate Mechanism after losing a fierce battle with the speculators.

On January 6, the dollar fell to a record low against the euro but rebounded slightly from its 3-year nadir against the yen on Tokyo's intervention to boost the currency. It plummeted to a fresh 11-year low against the British pound and fell to its lowest level in nearly 8 years against a basket of currencies under the weight of persistent concerns about the US current account deficit and expectations of continued low US interest rates.

In late New York trade, the euro was up 0.51 per cent at $1.2724, but off the record high of $1.2812. The dollar traded at 106.19 yen, off slightly on the day but up from the session low 106.03 yen. In other trading, sterling rose 0.82 per cent to $1.8213 but dropped back from the 11-year high of $1.8277. The dollar fell 0.20 per cent to 1.2314 Swiss francs, but rose from a more than 7-year low of 1.2240 francs hit in early New York trade.

On January 7, The dollar rose from a record low against the euro as investors took a break from selling the greenback while paying scant attention to yet another 'strong dollar' statement by US Treasury Secretary. Over the past month the investors pushed the euro to record highs against the dollar practically every day, topping out at $1.2812 on January 6.

The euro fell to a session low $1.2635, a loss of 0.74 per cent on the day. The halt in the euro's rise is not expected to last long. The dollar gained 0.67 per cent to 1.2392 Swiss francs. Sterling was only slightly down from the previous session's close against the dollar at $1.8190 but below 11-year highs of $1.8277 set on January 6.

On January 8, the dollar fell one per cent versus the euro, losing gains after a key European banking official said an improving global economy should help the European exporters bear the burden of a strong euro. The euro has risen more than 10 per cent against the dollar in the past two months, bringing its gains over the past 2 years to more than 40 per cent. European business groups have warned that the euro's strength is denting growth prospects.