THE Pakistani rupee was slightly lower in the inter-bank market last week. On the first day of the week, the rupee shed five paisa on buying and selling counters at Rs59.75 and Rs59.85. There was no major demand by the corporate sector, and the dollar selling by the exporters helped the rupee to retain its levels. On the following day however, the rupee posted fresh gains of five paisa in terms of dollar for buying and selling at Rs59.70 and Rs59.80, respectively.
Adequate supply of dollars and a continued check over the currency’s fluctuations by the State Bank helped the rupee to retain its position versus the dollar, analysts said. After maintaining the firmness for the day the rupee shed five paisa on buying in relation to the dollar at Rs59.75, while it showed no change on the selling side at Rs59.80.
Meanwhile, against the euro, the rupee gained in the first two days of last week at Rs76.60 and Rs76.90 for buying and selling respectively. By the close, the euro managed to gain at Rs77.20 and Rs77.50.
In Tokyo market, on the first day of last week the dollar hit a fresh five and a half month high as the market shrugged off a poor United States of America jobs report and focused on the Federal Reserve’s plan to keep lifting the interest rates.
The US currency however, recovered as the US data showed a slight rise in hourly wages, as well as another report showed prices paid by manufacturers rising in the same month.
It found further support after Fed officials signalled that they would keep lifting rates to fight off the simmering inflation pressures.
The dollar has risen by more than two per cent against the yen and more than 1.5 per cent versus the euro since the Fed suggested two weeks ago that it could raise interest rates quicker than the current moderate pace if inflation heats up.
The Fed has raised interest rates by a quarter percentage point seven times since June, bringing its funds rate to 2.75 per cent. Over the same period rates have been stuck at two per cent in the euro zone and virtually zero in Japan.
Analysts say that much of the dollar’s gains in past weeks have been driven by the unwinding of short positions, as the prospect of continued rate rises outweighs worries about large and growing US fiscal and external deficits.
Meanwhile, in the London market the dollar rose to its highest level against the yen in over five months as investors bet higher interest rates would continue to support the US currency the currency rose above 108 yen for the first time since October.
The dollar was also up by 0.2 per cent at $1.2885 to the euro. Higher United States rates often bolster the currency by making dollar-denominated assets more attractive to investors globally. Also supporting the dollar, analysts said, was news from Japan that
the country will not change its foreign reserve currency mix, as this could destabilize the markets. The euro fell to $1.2819, its lowest since February 10.
The relative softness of the Japanese and euro zone economies also means that interest rates in those areas will likely stay below the US rates for now, making the dollar more attractive than the yen and the euro.
The dollar’s rally stalled on April 6, as traders locked in gains after the currency hit a five month high against the yen and a two month peak versus the euro. The dollar rose to 108.90 yen on April 5, its highest level since October 19 and up more than five per cent in less than a month on hopes that the Federal Reserve might boost the pace of its credit tightening to nip inflation at the bud.
But the perception that the rally may have gone too far too fast prompted traders to take profits, especially after Fed chief Alan Greenspan did not mention the threat of inflation when the talked about soaring oil prices.
In the New York market, the dollar traded in narrow range on April 6, as traders debated whether the greenback’s recent gains against the euro were overdone in the absence of any major economic news to provide near term direction.
The euro traded at $1.2867 up just 0.1 per cent from a day earlier. The dollar was little changed against the Swiss franc at 1.2057 francs, while sterling was off at $1.8794.
In the London market, meanwhile, the dollar lost ground against the euro and the yen. The euro showed little reaction after the European Central Bank left interest rates at historic lows of two per cent.
Sterling dropped, however, on fading expectations of a United Kingdom rate hike,
following weak manufac-
turing data and a no-change decision from the Bank of England.
The dollar was down 0.4
percent against the yen at 108.25 yen, more than half a yen below five-month highs
set on April 5. Sterling was down half a percent against the euro at 68.79 pence and weakened against the dollar to $1.8759.
Expectations of Federal Reserve will tighten monetary policy aggressively to offset rising inflationary pressure had pushed the dollar to a two-month peak versus the yen earlier last week.
In New York market, on April 8, the dollar recovered early losses against the euro, as crude oil prices fell on rising stockpiles in the US, the world’s largest consumer of energy. The euro fell 0.1 per cent against the dollar to $1.2856.
Speculators who are behind mammoth gains in the oil and commodities markets in 2005 unwound their long positions, leading some analysts to wonder if the oil rally had peaked. That was in contrast to earlier in the session, when comments by European Central Bank President Jean-Claude Trichet pushed the euro to a one-week high of $1.2940.
He raised concerns about the inflationary impact of high oil prices.
Against the yen, the dollar was little changed at 108.61 yen. The dollar also recovered from an earlier decline against the Swiss franc, up 0.1 per cent to 1.2069 francs, while sterling fell against the dollar to $1.8696. The pound dropped on fading expectations of a UK rate hike following weak manufacturing data and a no-change decision from the Bank of England on rates.
