26 January 2004	Monday	03 Zilhaj 1424

The rupee-dollar parity remained range-bound in the local currency market during this week. On the week's opening day (January 19), the rupee inched up with one paisa in interbank market against the dollar by changing hands at Rs57.33 and Rs57.36. Firmer trend was seen on January 20, when the rupee did not move to any side in trading, despite heavy payments. Satisfactory supply of dollars helped the rupee maintain its firmness. The rupee had strengthened in recent days against the dollar on the back of high remittances and exporter-led dollar sales

On January 21, the rupee shed one paisa to trade at Rs57.35 and Rs57.37 against the dollar. Banks' dollars buying in the interbank market forced the rupee to shed two paisas in relation to the greenback to change hands at Rs57.35 and Rs57.37 on January 22.

Payment requirements pushed the rupee value down, but high remittances from the Overseas Pakistanis and exporter-led sales, restricted any major decline in the parity. At the close of the week, firmer trend in the rupee-dollar parity continued. The rupee remained stable at its overnight level and the dollar traded unchanged at Rs57.35 and Rs57.37 over the previous weekend close.

In the kerb market, the rupee on January 19 recovered three paisas in relation to dollar and traded at Rs57.52 and Rs57.57. The local currency gained slightly on improved supply of dollars and less demand. On January 20, the rupee, however, did not show any major variation in terms of dollar and traded at Rs57.52 and Rs57.58. On January 21, the rupee firmed against dollar on balanced demand and supply position changing hands at Rs57.52 and Rs57.57.

On January 22, the rupee recovered another five paisas against the dollar changing hands at Rs57.42 and Rs57.52 on easy supply of the greenback, as the Overseas Pakistanis are returning their homes to celebrate Eid-ul-Azha with their relatives. Remittances and exporters' selling could be another factor.

On January 23, the rupee managed to gain due to sufficient supply of dollars, extending its overnight winning streak versus the dollar in the kerb market, it picked up two paisas versus the dollar, closing the week at Rs57.40 and Rs57.45. The rupee, however, gained 15 paisas against the dollar over the previous week close

Against the euro, declining value of the European single currency in the world markets helped the rupee pick up 20 paisas on January 19, which traded at Rs70.98 and Rs71.28. The rupee on January 20, however, lost 80 paisa at Rs71.80 and Rs72.10 in the kerb market.

The local currency lost handsome ground on euro's recovery versus major currencies in world markets, where the single European currency recovered some losses versus the greenback, gaining one per cent at 1.2485 dollar. It lost another 95 paisas on January 21 and traded at Rs72.74 and Rs73.05 versus the euro.

On January 22, the rupee halted further erosion versus the euro and traded at Rs72.71 and Rs73.00, gaining five paisas only. The single European currency is gaining its strength versus the major currencies in the world markets. The rupee, however, shed another 30 paisas on January 23, with the euro changing hands at Rs73.05 and Rs73.35.As compared to the previous week end close, the rupee in the week under review lost 188 paisas against the euro.

In the international financial market, a week-long rally in the dollar crumbled on January 19, when the greenback dropped some 2 per cent against most major rivals as investors re-tested Europe's resolve over curbing the ascent of the euro. But the dollar was fairly steady against the yen after the Bank of Japan surprised traders by easing monetary policy just as its stubborn deflation problem appears to be improving.

A statement from the euro group meeting of euro zone finance ministers and the European Central Bank signalled a green light to buy back the euro after a 5-cent decline last week. The euro rose to $1.2574, up around 1.70 per cent from the previous day's New York close. The euro surged to 134.63 yen, a gain of more than 1.50 per cent. It had suffered brief losses in the European session after the head of Germany's IFO institute said the ECB should intervene to bring the euro below $1.20.

Against the yen, the dollar hit a two-week high of 107.90 after the BoJ's surprise decision to raise its target range for excess liquidity in the banking system, which was read by markets as a sign of concern about export-damaging yen strength. The dollar was around 107.07 yen. Sterling surged over 2 per cent to hit $1.8216, before trading back to around $1.8196, while the greenback was down 1.70 per cent against the Swiss franc at 1.2473. The US dollar fell around one per cent against the Canadian dollar to C$1.2904.

On January 21, the dollar fell but more moderately than its dive the previous session as investors weighed how the European Central Bank will treat euro strength. The euro hit a session high around $1.2673 before slipping to $1.2631 up 0.41 per cent from the previous close. The euro is up nearly 3 cents so far this week against the dollar. The dollar fell to 106.90 yen off 0.11 per cent a day after Japan's surprise moves to loosen monetary policy by raising excess liquidity in the banking system.

Sterling extended previous day' sharp rise, the biggest in nearly nine years, to trade at $1.8297 up 0.54 per cent on the day. One bright spot was the greenback's 0.67 per cent rise to C$1.2999 against the Canadian dollar, nearly erasing a similar-sized loss in the previous session. After scoring its biggest one-day gain in 8-1/2 years on January 20, the pound enjoyed further strength as the Monetary Policy Committee said in the minutes of its January policy meeting a gradual rate rise would be necessary if the domestic economy grew as was forecast in November.

On January 22, the euro reached a one-week high against the broadly beaten-down dollar after investors viewed euro zone policy-makers' weak opposition to renewed euro strength as a signal to buy the single currency for greenbacks. As the euro moved toward its session highs, a big euro sell order flooded the market and knocked it lower.

By late afternoon in New York, the euro traded around $1.2709 up 0.65 per cent from previous day's New York close. The euro has risen nearly 4 cents since the start of the week, recouping much of the previous week's decline. The dollar also fell against the yen, down 0.87 per cent on the day to one-week lows and was trading at 106.00 yen according to a report.

Sterling gained to one-week highs against the dollar on January 22, rising in tandem with the euro but also helped by recent signals from the Bank of England (BoE) that UK rate hikes remained on the cards.