THE US dollar gained against the Pakistani Rupee in the first few days of last week, but by the close of the week the rupee recovered in the inter-bank market. Similarly in the open market, the rupee had touched new lows for dollar but recovered somewhat by the close of the week.
On May 2, while the rupee showed no change in the inter-bank market in its weekend levels for buying and selling at Rs59.48 and Rs59.49, in the open market it fell to Rs59.97 and Rs60.02 for buying and selling respectively. On the following day, the rupee moved two paisa against the dollar at Rs59.46 and Rs59.47, because of easy supply of dollars, in the inter-bank market.
On May 4, in the inter-bank market, the rupee rose by five paisa to Rs59.51 and Rs59.53 for buying and selling respectively. In the open market it gained two paisa for buying and selling at Rs59.95 and Rs60.00 respectively.
By May 6, the rupee had recovered against the dollar at Rs59.50 and Rs59.52 for buying and selling respectively. Increase in remittances and less demand by the corporate sector helped the rupee to recover.
On the first day of last week, in the London market, the dollar recovered one per cent from preceding week’s six week lows versus the yen. The yen was also hurt by reports that North Korea may have test-fired a missile into the Sea of Japan. The currency retreated further from a three-month peak versus the euro set on April 29 after a Chinese state newspaper said deepening reforms had created the conditions for China to revalue the yuan.
The report, coupled with a surprise rise in the yuan’s value beyond its tightly regulated trading band on April 29 that was later called an error, added to already intense speculation that China will soon relax the yuan’s peg.
The dollar hit a two week high against the euro on May 3, as traders bet the United States will keep raising interest rates steadily to fight inflation, despite signs of the slower US economic growth. Weak US economic data, starting with slower-than-expected first-quarter gross domestic product growth last week, had raised some concerns the US central bank may slow down the pace of rate rises.
The dollar is going to continue to strengthen — the US soft patch is not sufficient to delay the US tightening cycle, while in the euro-zone the tightening cycle is struggling to get started, said Steven Pearson, chief currency strategist at the HBOS.
The dollar hit its highest level against the euro since April 15 at $1.2831, but eased to $1.2853 by 1140 GMT, steady from the US close. The dollar also hit a two-week high against the Swiss franc of 1.2016.
In the New York market, the dollar slipped on May 03, after the Federal Reserve raised interest rates. It expected long term US inflation to remain contained. The euro rose to around $1.2914, according to Reuter’s data. The quarter percentage point rate increase to three per cent was completely in line with expectations.
Meanwhile, in the London market, the dollar hit a six week low against the yen on May 4, after the Federal Reserve played down inflation risks, prompting talk that the pace of US interest rate rise may slow.
The yen gained on mounting speculation that China would soon revalue the yuan, a move that would be likely to spark a rally in Asian currencies. The US central bank on May 3 raised its key interest rate to three per cent, the eighth quarter-point rise in eight meetings since last June, but said long-term US inflation remained contained. It also said that spending has slowed in the face of high energy prices but the job market is improving.
The dollar hit its lowest levels since March 17 at 104.32 yen down almost two-thirds of a per cent on the day. The dollar was down 0.7 per cent at $1.2954, compared with a two-week high in the previous session of $1.2825.
Other heavily-traded currencies, including the British pound, the Australian dollar and the Swiss franc, also gained versus the greenback. The euro was little moved after the European Central Bank kept interest rates unchanged at two per cent, as expected, following its monthly policy meeting.
In the New York market, the dollar retreated across the board on May 4. Slower interest rate hikes tend to dim the allure of some dollar-denominated assets, especially short term deposits.
The euro rose around 0.6 percent against the dollar to $1.2946. Since late March, the euro has bounced between a low of around $1.28 and a high around $1.31. The euro reached little to news the European Central Bank kept interest rates at two per cent and offered a grim short-term outlook for the euro zone economy. At a news conference following the bank’s decision, the ECB President Jean-Claude Tricher ruled out a cut in interest rates in the next term. Meanwhile, speculation persisted China may relax controls on its currency soon and allow the yuan to appreciate.
In the New York market, the dollar slipped modestly against the euro and yen on May 5, weighed down by persistent speculation about a possible revaluation of China’s yuan and the Standard and Poor’s downgrading of automakers General Motors Corp and Ford Motor Co’s ratings to junk status.
Meanwhile, the US dollar was firmer in the Tokyo market, ahead of a much awaited US jobs report, while sterling straggled as British Prime Minister Tony Blair secured a third straight term but with a slimmer majority.
The sterling was at $1.9020, versus $1.9067 in late New York trade on May 5. The dollar firmed to around 104.65 yen from 104.46 yen, edging further away from s seven week low of 104.20 yen hit on May 4.
Dealers said that few fundamentals were behind the dollar’s modest rebound, which they attributed to speculators buying back the US currency after recent losses as well as to demand from Japanese investors.
In the London market, the dollar traded slightly firmer on May 6, while sterling came under selling pressure. The dollar was also 0.12 percent stronger at 1.1948 Swiss francs, but traded steady near late New York level against the euro at $1.2950.
The euro gained some support after data showed German manufacturing orders rose by 2.2 per cent in March from February to reach their highest level since last December. But it failed to build new gains on the day.
In the London market, sterling fell against the dollar and hovered near a two-week low against the euro on May 6 as British election results showed Prime Minster Tony Blair had returned to power but with a greatly reduced majority.
Data showing a slowing British property market also weighted on the pound, reinforcing expectations the Bank of England will leave interest rates on hold next week, and may even cut rates before the end of the year. The pound was down more than half a percent at $1.8920 as a robust US jobs report lifted the dollar across the board.
THE US dollar gained against the Pakistani Rupee in the first few days of last week, but by the close of the week the rupee recovered in the inter-bank market. Similarly in the open market, the rupee had touched new lows for dollar but recovered somewhat by the close of the week.
The report, coupled with a surprise rise in the yuan’s value beyond its tightly regulated trading band on April 29 that was later called an error, added to already intense speculation that China will soon relax the yuan’s peg.
