RUPEE REPORT: Import payments push dollar demand higher
RUPEE came under slight pressure this week on rising dollar demand in the local currency market. Though, in the inter-bank market, the rupee commenced the week on a positive note despite increase in dollar demand by banks to meet import payments, it managed to recover one paisa over the previous weekend’s levels. The dollar was quoted at Rs59.39 and Rs59.41 in the inter-bank market on March 21. On March 22, the rupee managed to hold its overnight levels, despite increased demand for the US currency. The rupee continued under demand pressure but the parity remained stable at Rs59.39 and Rs59.41. The SBP provided dollars to meet rising demand, which resisted sharp fall in rupee value versus the dollar in the inter bank market.
The local currency market remained closed on March 23, being public holiday on account of Pakistan Day. When trading resumed on March 24, the rupee recovered six paisa versus the dollar, on inflows of nearly 10-12 million dollars, amid rising demand by the corporate clients. The dollar traded at Rs59.33 and Rs59.35.
On March 25, the rupee fluctuated slightly in the inter-bank market on improved demand for the US currency and traded at Rs59.35 and Rs59.36, after one paisa decline over the previous day’s levels. In the inter-bank market, the rupee, however, managed to recover four paisa versus the dollar against the previous week close.
In the open market, the rupee showed weakness versus the US currency on the week’s opening day. It lost eight paisa for buying and 13 paisa for selling, changing hands at Rs59.60 and Rs59.70 on March 21.
The rupee overnight weakness prevailed versus the dollar in the open market on March 22, when the parity lost 10 paisa and traded at Rs59.70 and Rs59.80. The dollar’s strength in the overseas markets and its demand for major payments in the local market at the end of third quarter of the fiscal year had negative impact on the local currency.
When trading resumed in the open market on March 24, after remaining suspended for a day on March 23, being Pakistan Day, the rupee further lost 10 paisa against the dollar and traded at Rs59.80 and Rs59.90 on increasing buying by the banks.
In the open market the rupee shed another five paisa against the dollar on March 25, changing hands at Rs59.85 and Rs59.95 on increase demands by the corporate clients. In the early morning trading session, the rupee had crossed an important mark of 60 per dollar, but then it trimmed some losses at close on easy supply of dollars. During the week, the rupee in the open market lost 33 paisa for buying and 40 paisa for selling against the dollar.
Against the European single common currency, the rupee, however, rose by 25 paisa and traded at Rs79 and Rs79.30 on March 21. The rupee extended its gains versus the euro on March 22. It recovered another 45 paisa, trading at Rs78.55 and Rs78.85 against the euro.
The rupee posted fresh gain of 75 paisa against the euro on March 24, when it traded at Rs77.80 and Rs78.10. The single European currency came under pressure on rising dollar’s demand in the international markets. As a result, the rupee recovered 30 paisa more in the open market, where the euro and was trading at Rs77.50 and Rs77.80 on March 25. Over the previous week close, the rupee recovered 175 paisa versus the euro this week.
In the international financial market, the dollar rose to two-week highs against the euro and the Swiss franc on March 21, amid, speculation that the US Federal Reserve may signal a more aggressive pace of interest rate rises at its meeting March 22.
In New York, the euro had its sharpest one-day fall since the first week of the year, down 1.1 per cent over the previous week close to $1.3165.
Against the yen, the dollar was trading at 105.12 yen, up around 0.4 per cent, but off an intraday high of 105.50 yen. The dollar was up around 1.1 per cent at 1.1774 Swiss francs. Sterling fell to a 1-month low around $1.8947, down 1.2 per cent for its deepest one-day fall since June.
In London, sterling traded 1.2 percent weaker on the day at $1.8985, after falling to its lowest level since Feb. 22 at $1.8981.
On March 22, the dollar bolted higher after the Federal Reserve hiked interest rates. The US currency extended recent gains, hitting 1-month highs against the euro, yen, Swiss franc and sterling. In New York, the euro had its steepest one-day decline against the dollar since the first trading day of the year, dropping 0.7 per cent from the previous day to around $1.3055.
Against the yen the dollar rose to a 1-month high of 105.73 yen, about 0.6 per cent higher on the day. The dollar is close to breaching the upper edge of its four-month-old trading range against the yen, at around 106.20 yen. Against the Swiss franc, the dollar also rose to a one-month high, up 0.9 per cent to 1.1880 francs.
Sterling had its largest one-day fall since June of last year, down around 0.7 per cent to $1.8854. The dollar has gained more than 3 per cent against the euro and yen since the start of the year as investors bet that rising interest rates and higher yields on dollar assets might partially offset worries about structural problems in the US economy.
On March 23, the dollar rose to new one-month highs against the euro and yen. In New York, the euro was down 0.8 percent, at $1.2975. Earlier in the session, the euro zone currency broke through the psychologically important level of $1.30 to touch one-month lows around $1.2960.
Though the euro has fallen nearly 5 US cents in the past week, it is still within a range of $1.27 to $1.3450 for the year. Against the yen, the dollar jumped to 106.18 yen, up 0.6 per cent and its highest level since February 10. The dollar was at a five-week high against the Swiss franc, up 0.9 per cent at 1.1970 francs. Sterling was at $1.8678, down nearly one per cent.
On March 24, the dollar gained against the euro, riding a wave of bullish sentiment higher on expectations of reports of solid US economic growth next week. Against the strengthening dollar, the euro dropped around 2.8 per cent this week.
In New York, the euro fell to a five-week low of $1.2934, down 0.4 per cent from its levels late on March 23. It was trading within a few points of a key chart level of $1.2925, which if breached would allow the possibility of a further decline to $1.2730, a low for the year.
Against the yen, the dollar traded at 106.35 yen, up 0.3 per cent. Against the Swiss franc, the dollar rose 0.5 per cent to 1.2012 francs, after triggering automatic buy orders as the pair crossed 1.20 francs. Sterling was little changed at $1.8690.
At the close of the week on March 25, the dollar edged up to a fresh six-week high against the euro and held near a six-week peak versus the yen. Trading was sluggish as many markets were closed for a holiday weekend, which cooled off the dollar’s rally.
The dollar has so far this week enjoyed its strongest run against a basket of currencies since the first week of the year, when it unexpectedly jumped higher. The dollar’s roughly 3.5 per cent climb against the euro and two per cent gain versus the yen in the past week have been driven by investors scurrying to cover short dollar positions.
The US and Europe markets were closed due to Good Friday and Easter holidays. In Tokyo, the euro fetched $1.2943 after earlier dipping to around $1.2930, its lowest level since February 14.
The single European currency has fallen 5.4 percent from a record high near $1.3670 hit in December. The dollar was at around 106.31 yen little changed from late levels in the United States after having struck a fresh six-week high of 106.58 yen in New York.
