Continued rise in oil prices in the international market, heavy oil import payments, widening trade gap and high inflation is having a negative impact on Pakistani rupee.

Persistent rise in demand for dollars has brought the rupee under extensive pressure during the week in review. Euro is also gaining strength over the rupee and has touched Rs76 mark this week.

Importers' forward buying and exporters' cautious attitude towards dollar- selling have pushed the rupee/dollar parity down in the local currency market. The rupee crossed Rs61 barrier this week, after breaching Rs60 mark last week. It is now heading towards Rs65 mark. The rupee has shed more than four per cent versus the dollar since July 1, 2004.

On the week's opening day , when trading resumed in the inter-bank market on October 18, after a day break, the rupee sharply lost 15 paisa versus greenback changing hands at Rs59.95 and Rs60. Earlier during the session the rupee had touched Rs60 and Rs60.05, as dollars demand outstripped supply. However dollar selling reported by three large international and local banks on central bank's behalf later eased some pressure over the rupee. These banks injected nearly $20-30 million into the market.

On October 19, the inter bank rupee-dollar parity touched the 28-month low on increased demand as the rupee lost 30 paisa in a single day slide to trade at Rs60.23 and Rs60.33 versus the dollar. Banks bought nearly $30-40 million to cover oil payments need. An abrupt rise in world oil prices pushed the dollar demand higher in the inter-bank market further on October 20, with the rupee shedding 33 paisa against the dollar, which traded at Rs60.55 and Rs60.66.

The rupee-dollar parity rates turned volatile on October 21 in the inter-bank market on panic forward dollars buying mainly by the importers and the corporate sector. The rupee crossed all time low of Rs61, touching nearly four-year low level at Rs61.40 and Rs61.45, down 115 paisa against the dollar.

The State Bank of Pakistan (SBP) intervened in the market by injecting nearly $50 million to rescue the rupee from heavy losses. The move had a positive impact on the parity, as the dollar rates came down to Rs60.30 and Rs60.50.

On October 22, the State Bank reportedly injected 60-70 million dollars into the market to minimise the rupee depreciation. This helped the rupee recovered 30 paisa verses the dollar, which was seen changing hands at Rs60 and 60.10. This recovery might prove short-lived as demand for dollars remains high as outflows of dollars are not matching with inflows.

In the open market the rupee surprisingly did not react sharply to weekend inter-bank market direction, and sustained its prevailing levels at Rs60.10 and Rs60.20 in process of trading on October 18. However, higher demand by corporate sector hurt the firmness on October 19, and the rupee shed eight paisa for buying and three paisa for selling changing hands at Rs60.18 and Rs60.23 versus dollar.

On October 20, the rupee posted loss of 32 paisa in relation to the dollar and settled at Rs60.50 and Rs60.60. Panic dollar-buying by the inter-bank market on October 21 pushed the rupee further into minus column in the open market, where the rupee nosedived losing nearly 95 paisa versus the dollar which traded at Rs61.30 and Rs61.50. On October 22, the rupee gained 50 paisa versus dollar in open market at Rs60.80 and Rs60.90. During the week the rupee in the open market shed 70 paisa against the dollar.

Versus the European single common currency the rupee maintained its downtrend and traded at Rs74.55 and Rs74.85 on October 18. It extended its weakness versus euro on October 19, changing hands at Rs74.60 and Rs74.90. On October 20, the single European currency strengthened on the back of falling value of the dollar in the world markets. It tracked the dollar's pattern, breaching the Rs75 level in the open market after picking up 75 paisa at Rs75.35 and Rs75.65.

The euro maintained its surge versus the rupee, breaching the new barrier of Rs76 on its improved demand on October 21. The single European currency was available at Rs76.50 and Rs76.80. The rupee however, picked up 60 paisa in relation to euro to trade at Rs75.90 and Rs76.20 on October 22.In the week the rupee loss 135 paisa against the euro.

In the international financial market, the dollar fell to multi-month lows against the euro and Swiss franc on October 18, after the release of capital flows data that suggested foreign demand for US assets could be slowing. But, after teetering near an 8-month low versus the euro, the dollar fought its way back to the psychologically important level of $1.25 as traders figured the United States is attracting enough capital to finance its huge trade deficit for now.

In New York, the euro was at $1.2497, up around 0.3 per cent on the day but off its near-eight-month high of $1.2535 touched earlier.

The dollar was weaker at 1.2318 Swiss francs, down 0.3 per cent on the day but up from 1.2271 francs, a new three-month low. The dollar was slightly weaker against the yen at 109.26 yen, while the pound was down at $1.7984, after data showed the sharpest third-quarter decline in UK house prices in nine years.

On October 19, the dollar fell to its lowest level against the yen in three months and drifted downward against most other currencies as dealers fretted about the state of the US economy. Dealers, however, were quick to note that the yen has not moved in lock step with oil and barely budged despite a sharper decline in crude prices.

The dollar pared losses earlier in the US session after the US bond yields rose in response to a larger-than-expected increase in US core consumer prices in September. But when interest rates quickly eased back, the dollar followed. In New York, the dollar was trading at 108.40 yen, down 0.77 per cent and near session lows of 108.23, the lowest level for dollar/yen since July 20.

The euro was up 0.18 per cent at $1.2516. Further gains for the euro were stymied by heavy options-related resistance at $1.2550. Against the Swiss franc, the dollar was off 0.24 per cent to 1.2284 francs. The dollar was up 0.09 per cent against the Canadian dollar, trading at C$1.2576.