DURING the week under review, calm prevailed in the local currency market amid quiet trading. Dollars in sufficient quantity were available in the market to meet any increasing demand. Rising inflow of remittances and the State Bank of Pakistan’s reserves restricted a sharp decline in rupee value against the dollar which remained range-bound throughout the week.
On mounting demand by corporate clients, the rupee shed five paisa against the dollar in inter-bank market on the opening day of the week. The dollar-demand increased to settle the payments of overseas oil bills. At the close, dollar was trading at Rs59.39 and Rs59.41 on March 28. As a result of rising remittances, the rupee maintained its overnight levels versus the dollar on March 29, trading at Rs59.39 and Rs59.41.
Range-bound trading was seen on March 30, as the rupee-dollar parity rates did not show major changes. The rupee made a marginal gain of one paisa for selling to trade at Rs59.39 and Rs59.40. Strong supply of dollars helped the rupee maintain its level versus the dollar. On March 31, the rupee-dollar parity remained unchanged. The dollar changed hands at Rs59.38 and Rs59.40, showing the gain of one paisa for buying.
The rupee-dollar parity rates remained unchanged at 59.39 and 59.40 amid balanced demand and supply position on April 1. Over previous week’s close, the rupee this week shed four paisa versus the dollar.
In the open market, the rupee managed to recover 15 paisa gain against the dollar in early trading session on March 28, with dollar changing hands at Rs59.60 and Rs59.70. But soon it trimmed its gains towards the closing session following an increase in dollar demand in the inter-bank market to meet the payments. At close, the dollar traded Rs59.65 and Rs59.75.
On March 29, the rupee did not show any change versus the dollar and remained stable at Rs59.65 and Rs59.75 for second consecutive day. But it lost five paisa on March 30, versus the dollar which traded at Rs59.70 and Rs59.75. On March 31, the rupee, however, lost five paisa for selling but remained at its overnight levels for buying to trade at Rs59.70 and Rs59.80 against the dollar.
Sizeable buying kept the rupee slightly under pressure versus the US currency in the open market on April 1. The rupee after maintaining a stable position during the current week shed five paisa against the dollar to trade at Rs59.75 and Rs59.85 in the open market. This week the rupee in the open market remained unchanged over the previous week’s levels.
Against the European single common currency the rupee posted fresh gains on the opening day of the week, recovering 45 paisa to trade at Rs77.00 and Rs77.30 on March 28. But on March 29 the euro strengthened its muscles, while rupee weakened by 25 paisa to trade at Rs77.25 and Rs77.55. On March 30, the rupee extended further losses against the euro, which traded at Rs77.40 and Rs77.70, depicting 15paisa decline in rupee value.
On the following day the rupee, however, managed to recover its overnight losses and traded at Rs77.25 and Rs77.55 on March 31, after gaining 15 paisa against the euro. On April I, the rupee slid 20 paisa in relation to the euro and traded at Rs77.45 and Rs77.75. At this level, the rupee was still five paisa down against the euro when compared to previous week’s levels.
In the international financial market, the dollar rose a cross the board on March 28, supported by continuing bullishness on the US economy and expectations of a proactive Federal Reserve on raising interest rates. The US currency rose to a five-month high against the yen and hit six-week peaks against the euro, Swiss franc and sterling in a fairly thin market. European markets were closed for the Easter holiday, leading to light market conditions.
In New York, the dollar rose to 107.06 yen, up around 0.6 per cent from last week close, after piercing a barrier option level at 107 yen. The greenback earlier rose to 107.37 the dollar’s break above resistance at 106.86 yen during Asian trading hours had acted as a springboard for the currency and it could climb even higher. The euro fell to around $1.2894, down around 0.5 per cent, and near its lowest level since February 11. Sterling was down about 0.2 per cent at $1.8659 after touching a session low of $1.8595. The dollar was up 0.3 per cent at 1.2036 Swiss francs after touching its highest mark since February 14.
A major earthquake off the coast of Indonesia pressured some Asian currencies lower. The dollar rose about one per cent against the Indonesian rupiah, with currencies such as the Thai baht and the Philippine peso under pressure as well. The dollar has benefited from the view that the Fed will raise interest rates at a more aggressive pace.
On March 29, the dollar weakened after a report showing a slight decline in US consumer confidence in March encouraged traders to take profits on recent gains. Market sentiment, however, remained positive, with the US currency holding near five-month highs against the yen and within a cent of recent six-week peaks on the euro. Analysts said investors continued to unwind bets against the dollar, anticipating more aggressive rate hikes by the Federal Reserve.
In New York, the euro rose against the dollar. It traded at $1.2923, roughly 0.3 per cent higher from over night levels, when the euro zone currency fell to a six-week low against the dollar. The dollar moved off its best levels on profit-taking. Against the Swiss franc, the dollar fell to 1.2014 francs. Sterling rose to $1.8735.
The dollar held its gains against the yen, trading at about 107.51 yen up 0.4 percent from previous day and a bit off a fresh five-month high of 107.58 yen. Analysts say Japanese data showing a higher jobless rate and a fall in household spending, as well as a 1.6 percent drop in Tokyo stocks, weighed on the yen. Dealers in Tokyo overnight also reported last-minute dollar buying by Japanese importers ahead of the fiscal year-end as well as positioning ahead of the tankan survey of business sentiment.
On March 30, the dollar traded flat against the euro and yen after recovering from early losses as investors braced for data later this week on inflation and jobs that could offer clues to the US interest rate outlook. In New York, the euro was at $1.2913 little changed from March 29, and above a six-week low around $1.2860 reached on March 28. The dollar was flat at 107.50 yen after hitting its highest level since late-October around 107.70 yen. The dollar was down 0.2 per cent against the Swiss franc at 1.1991 francs. Sterling was up 0.3 per cent, at $1.8789.
Last week the dollar gained broadly, particularly against the euro and yen, as investors bet on more aggressive US rate rises after the Federal Reserve flagged a pick-up in inflation at its last meeting. But since then, some investors have squared up their positions. It slipped at the weaker-than-expected final reading of US economic growth for the quarter. US gross domestic product grew at an annualized pace of 3.8 per cent in the fourth quarter, flat with the piror estimate, and down from 4.0 per cent in the third quarter of 2004. Economists had expected fourth-quarter growth of 4.0 per cent.
On March 31, the dollar faltered after tame US inflation data offset a robust manufacturing index in the Midwest, curbing expectations of more aggressive interest rate hikes by the Federal Reserve. Trading thinned ahead of the March US employment report due on Friday that many feel could help determine the pace of future US interest rate increases. Rising interest rates tend to boost the US currency since they enhance the allure of short-term, dollar-denominated assets.
In New York, the euro held its gains, up around 0.3 per cent from the previous day’s levels, at $1.2961 after breaching the psychologically important $1.30 level earlier in the session. The euro is on track for its weakest quarter against the dollar since the first quarter of 2001. Against the yen, the dollar was down 0.3 per cent at 107.09 yen, well below a five-month high of about 107.69 set in the previous session.
The dollar also eased 0.2 per cent to 1.1962 Swiss francs while sterling rose about 0.6 per cent to $1.8899. Last week the dollar rallied after the Fed noted a recent pick-up in inflation, making the market speculate that the central bank could be mulling rate increases larger than the measured, quarter-point, hikes on which it has thus far relied.
At the close of the week on April 1, The yen edged towards a five-month low against the dollar after a weak reading in the Bank of Japan’s quarterly survey of business sentiment raised more doubts about the strength of Japan’s recovery. But traders said the yen’s fall was stemmed ahead of the much-awaited US jobs data and because many in the market had factored in a weak figure for the BoJ’s tankan survey
