18 October 2004	Monday	03 Ramazan 1425

The Pakistani rupee crossed Rs60 mark versus the dollar and Rs74 barrier versus the European single common currency in the local currency market this week. Rising oil prices and heavy oil payments in the past weeks have pushed up dollar demand in the local market and exerting pressure on the rupee.

In the inter-bank market, the rupee, on the opening day of the week (October 11) was able to resist any decline against the dollar due to balanced demand and supply of the American currency, which was quoted unchanged over its previous weekend's Rs59.39 and Rs59.40. However, the parity could not resist sharp fall on the following day due to high dollar demand for oil payments and its short supply. Consequently the rupee shed 14 paisa on October 12, with the dollar changing hands at Rs59.53 and Rs59.55.

On October 13, the rupee, however, managed to hold ground versus the dollar. As a result, the parity remained unchanged and the dollar traded at its overnight level. The rupee firmness over the dollar, however, proved short lived as it came under demand pressure on asking demand for dollars on October 14 and lost 10 paisa more to trade at Rs59.63 and Rs59.65 in process trading. Continued demand for dollars in the inter-bank market pushed the rupee down further on October 15.

At one stage during the day, the dollar breached the key resistance level of Rs60 in the inter-bank market, due to surging corporate demand for oil payment requirements, and touched Rs60.13. Some large banks came to the rescue and offloaded large amount of dollars in the market, which eased pressure on the rupee and the session closed at Rs59.80 and Rs59.85, down 20 paisa over the previous day close. During the week, the rupee in the inter-bank market lost 41 paisa for buying and 44 paisa for selling against the dollar.

In kerb trading, the rupee managed to recover 5 paisa on October 11, moving in a tight range due to sufficient dollar supply. It traded at Rs59.70 and Rs59.75 against the dollar. However, the parity in the open market reverts back to its previous week close of Rs59.75 and Rs59.80 on October 12, after the rupee lost 5 paisa against the dollar. The decline in rupee value continues on October 13. The dollar first touched Rs60 on brisk corporate buying of dollar before settling at Rs59.80 and Rs59.85.

Persistent high demand for dollars in the inter-bank market forced the dollar to breach Rs60 barrier in the open market, where the rupee lost 20 paisa for buying and 25 paisa for selling in a single day trading, changing hands at Rs60 and Rs60.10 on October 14. The rupee weakness extended further on October 15, when it lost another 10 paisa for buying and 5 paisa for selling on continued high demand for dollars at close the dollar was changing hands at Rs60.10 and Rs60.15. In the week under review, the rupee in the open market lost 40 paisa for buying and 35 paisa for selling.

The rupee also extended weakness versus Euro. On October 11, it lost 5 paisa to trade at Rs73.75 and Rs74.05, amid persistent high demand for the European single currency. On October 12, the rupee managed to recover 50 paisa versus Euro due to low demand. Euro was quoted at Rs73.25 and Rs73.55, before Pak rupee lost 20 paisa on October 13 to trade at Rs73.45 and Rs73.75, due to rising demand. The rupee further lost 10 paisa against the Euro on October 14, when it traded at Rs73.55 and Rs73.85, amid persistent demand.

The decline in rupee value versus Euro continued on October 15. It lost 40 paisa more against the European single common currency which changed hands at Rs73.95 and Rs74.25. Over the previous week close, the rupee this week was lower by 25 paisa.

In the international financial markets, according to Reuter's daily reports, the dollar climbed against the euro in light trading on October 11, as investors took profits in the single European currency, which had risen after a surprisingly softer-than-expected US employment report last week. The US currency, however, fell to a one-month low against the yen; partly pressured by persistent speculation China could revalue its yuan currency sooner than many had thought.

The currency is pegged close to 8.28 to the dollar. The dollar lost more than a cent against the euro when payrolls data showed the US economy created far fewer jobs than expected. That added fuel to speculation the Federal Reserve could pause in its gradual rate hike campaign.

The latest market positioning data showed speculative traders increased their net long euro positions, effectively betting the currency will strengthen, to an all-time high of 44,811 contracts last. The data suggested the euro was overbought and could be poised for declines. The yen benefited from market speculation of a yuan revaluation in the near future. A break of the yuan's current peg with the dollar is anticipated to make Japanese exports more competitive, boosting underlying support for the yen.

In New York, the euro weakened to $1.2384 after hitting a one-week high against the dollar around $1.2433 last week. The euro also fell against the yen, to 135.30 yen. The dollar dipped nearly 0.2 percent against the yen to 109.27 yen after hitting its lowest level in a month at 109.14 yen earlier in the session. In other trading, the dollar traded flat against the Swiss franc at 1.2499 francs. Sterling rose to $1.7972 after data showed UK factory gate inflation hitting an eight-year high in September due to soaring oil prices.

On October 12, the dollar climbed against the euro rallying from previous weekend US jobs-related losses as it drew support from soft economic data from the Euro zone and Britain. The US currency also advanced against the yen after crude oil fro November delivery traded on the New York Mercantile Exchange rose to a record above $54 a barrel due to continued fears of supply disruption and higher global demand.

The dollar fell across the board after a surprisingly weaker-than-expected US employment report reinforced expectations that the Federal Reserve could pause in its cycle of interest rate hikes.

In New York, the euro fell to $1.2312. Sterling fell against the dollar as Britain's inflation rate unexpectedly fell below the Bank of England's 2 percent target in September to its lowest level in six months. The UK inflation report boosted expectations British interest rates will not go up again this year, undermining sterling's prospects. The dollar, meanwhile, climbed against the yen to 109.70 yen as the Japanese currency reeled from the impact of soaring crude oil costs.

Sterling fell more than half a percent against the dollar as news of a surprise fall in British inflation bolstered expectations that interest rates would not go up again this year. It fell across the board after the data, which reinforced a growing view that Britain's central bank would keep its powder dry in the coming months after five interest rate rises in the past year. It was down 0.55 percent on the day at $1.7878, just above session lows.

The pound fared slightly better against a broadly-weaker euro at 68.84 pence little changed from the New York close but less than half a penny away from eight-month lows hit last week.

On October 13, the dollar rose to a three-week high against the euro boosted by a fall in the price of oil, which should help narrow the US trade deficit and thus benefit the dollar. Crude for November delivery traded on the New York Mercantile Exchange fell to around $52 a barrel down from the previous day's record high above $54. Lower oil prices tend to benefit major oil importers like the United States by lessening the number of dollars paid to purchase oil.

Commodity prices as measured by the Commodity Research Bureau Index fell about 1 percent, also underpinning demand for the US dollar against currencies such as the Australian, Canadian and New Zealand dollars The economies of these so-called "commodity currencies" are perceived to be linked to global commodity prices.