17 January 2005	Monday	06 Zilhaj 1425

The local currency remained range-bound versus the American currency in local market this week in the absence of directions. In inter-bank market the rupee opened the week on a positive note reversing its weekend's weakness versus the dollar.

It gained five paisa, amid rising remittances and lack of buying interest, to trade at Rs59.50 and Rs59.55 on January 10. On January 11, the parity maintained its firm trend, as the rupee gained another three paisa over the dollar to trade at Rs59.50 and Rs59.52 in the inter-bank market.

Dollar demand existed in the market, but the continued inflow of workers' remittances helped the rupee maintain its firmness. But on January 12, the rupee failed to maintain its firmness versus the dollar, and lost five paisa for buying and eight paisa for selling, changing hands at Rs59.55 and Rs59.60.

However, the rupee's weakness proved short-lived as it staged a sharp recovery on January 13, when the dollar traded at Rs59.48 and Rs59.52. On the back of sufficient dollar supplies, the rupee managed to gain seven paisa for buying and eight paisa for selling against the dollar during the day.

On January 14, a sharp rise in dollar-inflow helped the rupee maintain its upward trend versus the greenback, gaining eight paisa for buying at 59.40 and 10 paisa for selling at 59.42.

Significant rise in remittances by the overseas Pakistanis and export proceed selling, enabled the rupee to expand the ground. Falling trend in dollar's value, on the other hand, also restrained the importers from fresh buying of the US currency. During the week, the rupee in the inter-bank market gained 15 paisa over the dollar.

In kerb trading, the rupee lost five paisa versus the dollar, which changed hands at Rs59.90 and Rs60 on January 10. But on January 11, the rupee managed to recover five paisa against the dollar and traded at Rs59.85 and Rs59.95. Improved dollar supplies on the back of increased inflows of remittances helped the rupee gain 15 paisa more on January 12, enabling the dollar to trade versus the rupee at the week's lowest level of Rs59.70 and Rs59.80 in the open market.

On January 13, the rupee in the open-market stayed unchanged at its overnight level. On January 14, the rupee did not show any change in its value versus the dollar in the open-market, where the dollar traded at Rs59.80 and Rs59.90 for third consecutive day. As a result, the rupee in the open-market gained only five paisa this week. Last week the parity had traded at Rs59.85 and Rs59.95.

Versus the euro, the rupee continued the down trend and touched Rs79 mark this week. On January 10, it fell sharply versus the European common currency and traded at Rs78.50 and Rs78.80, after losing 25 paisa.

It shed another 10 paisa on January 11, when the euro traded at Rs78.60 and Rs78.90. The single European currency however lost 35 paisa in relation to the rupee on January 12, when it changed hands at Rs77.95 and Rs78.25.

The rupee, however, failed to maintain overnight firmness against the euro on January 13, and lost 75 paisa to trade at Rs78.60 and Rs79. The local currency, however, gained 55 paisa against euro and traded at Rs78.05 and Rs78.25 on January 14. Over the previous week close, the rupee managed to recover 30 paisa against the European single currency, amid fluctuations this week.

In the international financial market, the dollar slipped on January 10, succumbing to profit-taking after last week's sharp rally as traders became cautious of US trade data. Economists expect the US trade balance to show a deficit of $54.0 billion in November, just off the record $55.46 billion shortfall recorded in October.

The United State's trade and budget deficits have been among the key factors behind the dollar's three-year decline, and most analysts believe the US currency still has further to fall to correct these imbalances.

The dollar barely flinched after the US Treasury Secretary John Snow affirmed the administration's strong dollar policy, and that markets will set exchange rates.

In New York, the euro rose to $1.3080, up about 0.2 per cent from previous weekend levels. The dollar slipped against the Japanese yen, to 104.28 yen, down nearly 0.5 per cent. Against the Swiss franc, the dollar fell to 1.1818 francs. Sterling rose 0.3 per cent to $1.8752.

On January 11, the dollar slid against the yen after a European Central Bank official fretted about the euros strength and said the Asian currencies should bear more burden of the greenback's broad weakness.

The comments swiftly pushed the dollar down to session lows against the yen at around 103.13 yen, and dragged the euro to intraday troughs against the Japanese currency at about 135.40 yen.

Many Asian countries, most notably China, have kept their currencies artificially weak against the dollar during the greenback's three-year decline, which has been particularly sharp against the euro. But if China loosens the peg of the yuan, currently fixed at 8.28 to the dollar, allowing the Chinese unit to rise, that should bolster other Asian currencies such as the yen against the dollar as well.

In New York, the dollar was trading at 103.28 yen, down about 0.8 per cent from previous day's levels. The euro traded nearly 0.2 per cent higher against the dollar at around $1.3109. The dollar was up against the Swiss franc at 1.1828 francs. Sterling rose to $1.8778.

On January 12, the dollar fell across the board after a much wider-than-expected November US trade deficit fuelled a sell-off in the currency. The data highlighted structural economic imbalances that have trapped the dollar in a three-year decline and threaten to keep pressing the currency lower, especially given the magnitude of the latest trade data.

The gap ballooned to a record $60.3 billion in November, defying Wall Street expectations that it would narrow to $54 billion. The euro soared to session highs around $1.3292 following the US trade report, before retreating to $1.3282, still a gain of more than 1 percent from its overnight levels.

Against the yen the dollar tumbled to five-week lows around 102.15 yen before it climbed back up to 102.28 as Japanese accounts tried to bid up the currency. The dollar also shed roughly 1.5 per cent against the Swiss franc to 1.1647 francs, and fell 1.6 per cent against the Canadian dollar to C$1.1986.

Sterling rose almost one per cent against the dollar from the day's lows to one-week highs of $1.8940. On January 13, the dollar recovered on profit-taking in other currencies and comments by the European Central Bank's top official urging Asia to adopt more flexible foreign exchange regimes.

At a press conference after the ECB left interest rates on hold, the ECB President said the consensus within the Group of Seven countries was for an orderly appreciation of Asian emerging market currencies.

His comments pushed the euro to intra session lows against the yen at around 135.14 yen and dragged the euro zone currency lower against the dollar to $1.3217 down 0.3 per cent from its overnight levels. The dollar rose 0.4 per cent against the Swiss franc to 1.1719 and was flat against the yen at 102.37 yen. Sterling, meanwhile, fell to $1.8828.

At the close of the week on January 14, the euro fell nearly one per cent against the dollar and hit a seven-week low versus the yen as traders digested European Central Bank comments the previous day that Asian currencies should move more freely.

The euros weakness was also due in part to dealers who sold the single currency after it failed to build on a rally earlier in the week on overwhelmingly weak US trade data.

Pressure on the euro mounted after the ECB president supported the ECB Chief Economist remarks earlier in the week that Asian currencies, specifically the Chinese yuan, must do more to bear the burden of dollar weakness.

The market also cited comments by the US President George W. Bush in a US newspaper interview promising to trim the budget deficit and repeating a "strong" dollar policy.