The rupee/dollar parity continued to show its weakness, amid fluctuations. When trading resumed after two-day break on account of weekly and bank holiday, the rupee was seen trading in a narrow band on opening day.
The importers' demand for dollars exerted slight pressure on rupee which shed three paisa in the inter-bank market on January 3, to trade at Rs.59.45 and Rs59.47 versus the dollar.
On January 4, the continued importers' demand for dollars to meet payment requirements pushed rupee further down versus the greenback. It lost 14 paisa changing hands at Rs59.59 and Rs59.61. Thus, with the start of the New Year, the rupee lost 16 paisa in relation to the dollar in two days trading.
On January 5, the rupee in the inter-bank market resisted slide versus the dollar and traded at Rs59.55 and Rs59.58 after recovering four paisa over its overnight levels. Though, dollar demand existed, supplies were enough to meet the importers' requirements due to fresh inflows of remittances.
However, the rupee failed to sustain its overnight gains versus the dollar in inter-bank market on January 6, as the currency was in demand by the corporate sector.
Persistent dollars' demand forced the rupee to shed four paisa. Some banks reportedly bought dollars to cover a routine debt payment by a power company in coming days.
On January 7, the rupee reversed its decline by recovering nine paisa versus the dollar in the inter-bank market, which enabled the US currency to trade at Rs59.50 and Rs59.54.
This improvement was on account of higher inflows of foreign exchange through remittances by overseas Pakistanis and exporters offloading of their holdings. In the first week of the New Year, the rupee lost 12 paisa versus the dollar in the inter-bank market.
In the open market, the rupee continued its weekend weakness versus the dollar on January 3, losing 15 paisa against the dollar, which traded at Rs59.85 and Rs59.95.
This significant decline in the rupee was due to rising dollar demand in the inter bank market. It did not show any change on January 4, and remained at its overnight levels of Rs59.85 and Rs59.95 despite persistent demand for greenback.
Rising dollar demand in the inter bank market pushed the rupee down by 15 paisa in the open market on January 5. The dollar crossed Rs60 mark to trade at Rs60 and Rs60.10.The parity maintained the overnight level on January 6, and traded unchanged at Rs60.0 and Rs60.10 in the open market.
On January 7, the rupee gained another five paisa to trade at Rs59.95 and Rs60.05. At this level the rupee posted a fall of 25 paisa in relation to dollar, when compared with the previous week close.
Against the euro, the rupee lost 30 paisa on January 3, and traded at Rs80.55 and Rs80.85. However, it managed to recover 55 paisa against the European single common currency on January 4 and traded at Rs80 and Rs80.30, as the euro failed to manage its firmness versus the world major currencies.
On January 5, the rupee posted fresh gain of 75 paisa against the euro, changing hands at Rs79.25 and Rs79.55. It did not show any change in its value on January 6, as euro staged a slight recovery in the world markets.
On January 7, the local currency gained another five paisa, changing hands at Rs79.20 and Rs79.50.Over the previous week close, however, the rupee this week recovered 115 paisa versus the dollar.
The euro seems to have captured 50 per cent of the open market trading in Pakistan. The demand for euro has multiplied in the last two years. It now stands as the second most attractive currency. Both the business community and individuals have found it an alternative for investment and savings.
On the international front, the dollar rebounded on January 3, after last week's heavy sell-off. Traders returning from the holiday season saw that many currencies trading against the dollar were at attractive levels for profit-taking. But a US factory report showed that the down employment in December slowed some the dollar-buying.
Most analysts are of the opinion that the widening US trade and budget deficits will be likely to continue to weigh on dollar in 2005 after pushing the euro up about eight per cent to record highs against the greenback last year.
Last week, the dollar hit a record low against the euro, but the US currency has rallied since then on the view that it was slightly oversold in the final trading days of 2004.
In New York, the euro slipped to $1.3457, down around 0.7 per cent from the last week close. The dollar was up about 0.2 per cent against the Japanese currency at 102.71 yen and also up 0.9 per cent at 1.1482 Swiss francs.
Sterling traded down 0.7 per cent against the dollar to $1.9042. Light trade made price moves erratic, with key currency trading hubs London and Tokyo closed for holidays.
On January 4, the dollar rallied extending gains after minutes of a December Federal Reserve policy-setting meeting signalled the US central bank remains on track to continue raising interest rates.
The euro marked its biggest one-day fall against the dollar since June amid fairly heavy volume. Against the Japanese currency, the dollar rose as high as 104.80 yen, the largest one-day rise since last May.
In late trade in New York, the euro was trading at $1.3279, off session lows of $1.3251 but down 1.3 per cent from the previous day's level. The dollar rose to 104.58 yen, up about 1.8 per cent on the session. Against the Swiss franc, the dollar rose steeply, trading at 1.1671 francs. Sterling was trading down at $1.8830.
On January 5, the dollar was little changed after the currency this week won back almost a quarter of the ground lost against the euro in 2004. It received an added boost late on January 4, after the minutes of the Federal Reserve's latest meeting suggested the US central bank will maintain its current pace of interest rate rises.
In New York, the euro was slightly down from its previous day's levels at $1.3257, around 4 cents below its lifetime high of $1.3667 scaled last week. In a volatile session, the dollar rose as high as 105.02 yen before easing back to 104.10 yen, down 0.5 per cent from a day earlier.
Against the Swiss franc, the dollar was flat at 1.1684 francs after earlier hitting a seven-week high. Sterling bounced from a six-week low against the dollar. It traded a quarter percent stronger on the day at $1.8865, after rebounding from a six-week low of $1.8727 hit earlier in the session in the wake of poor consumer lending figures in London.
On January 6, the dollar resumed its rally, helped by a growing view in the market that steady economic growth is making the United States more attractive than other parts of the world for foreign investment.
The euro fell against the US currency for the fifth global session on the eve of the December US employment report. It was about five cents below the $1.3667 record high it hit a week ago.
In New York, the euro was trading around $1.3170, down about 0.7 per cent from the previous day's levels. Against the Swiss franc, the dollar traded up 0.6 percent to 1.1746 francs.
The dollar was also up roughly 0.9 per cent at 105.06 yen. The dollar has risen nearly 2 yen since the start of the year. Sterling fell 0.4 per cent to $1.8742. At the close of the week on January 7, the dollar relinquished some of its New York gains in Asian trading.
The dollar has climbed about five cents from record lows against the euro since the start of the year. The dollar's four-day rally, which has driven the euro nearly three percent lower for the year to date on concerns about the US budget and current account deficits. The euro was fetching around $1.3188 compared with 1.3172 in late US trade.
The dollar was at 104.57 yen versus 105.01 in late trade in New York, where it rose as far as 105.19, a level where some speculators were seen completing their unwinding of dollar short positions.
On a year-to-date basis, the dollar has gained more than two per cent against the yen. The dollar was top-heavy above 105 yen where the Japanese export orders were lined up. Sterling set a fresh six-week low against the dollar. Against the dollar, sterling fell to $1.8675, its lowest level since late November.
