DURING the week, the Pakistani Rupee remained under pressure in the open market as the demand for the currency was high. As a result of rising demand, the gap between the official and open market rates widened. On the opening day of last week, the dollar was quoted at Rs60.60 for buying and Rs6.70 for selling. The following day the rupee shed five paisa for buying and selling at Rs60.65 and Rs60.75 respectively.
On May 26, the rupee lost 20 paisa against five paisa fall a day earlier to Rs6.90 and Rs61.0 for buying and selling respectively. By the close of the week the rupee had recovered 15 paisa for buying at Rs60.75 and 20 paisa for selling at Rs60.80.
In the inter-bank market the rupee closed at Rs59.55 and Rs59.57 for buying and selling respectively. Against the euro, the rupee showed some fluctuations, but by May 27, it had gained 20 paisa for buying at Rs76.50 and appreciated 30 paisa for selling at Rs76.70
In the Tokyo market, the dollar held near a seven month high against the euro euro on May 23, on expectations that US interest rates would keep rising. Bullish sentiment for the US currency was underscored by data showing speculators in Chicago’s futures market boosted dollar long positions across the board.
The Federal Reserve, which has raised short-term interest rates eight times in the past year to 3.0 per cent, was expected to keep boosting rates to ward off inflation as the US economy grows modestly. In contrast, the European Central bank was seen keeping rates at 2 per cent given tepid economic growth in the euro zone.
The Fed’s ongoing rate hikes have boosted the dollar this year by widening its yield advantage, while the euro has been dogged by Europe’s sluggish economic growth and a possible French rejection of the European Union constitution in a referendum.
The euro bought around $1.2575, little changed from the level in late US trade and in sight of a seven-month low around $1.2535 hit a day earlier. The euro has fallen more than 7 per cent against the dollar this year. The US currency fetched 107.50 yen, dipping from late New York levels but not far from the one-month high of 108.30 yen touched a day earlier
In the New York market, the dollar was little changed against the euro on May 24, as mixed messages on the US inflation emerged. A generally benign inflationary outlook should ensure that the Fed would keep the US interest rate increases at a gradual pace. Slower interest rate hikes tend to diminish the allure of some dollar-denominated assets, especially short-term deposits.
Against the yen, the dollar fell to 107.57, down about 0.1 per cent from late May 23. The dollar fell against the Swiss franc at 1.2285 francs. Sterling meanwhile, fell to $1.8271. Expectations of growing interest rate differentials between the United States and the euro zone, where sluggish domestic demand threatens the growth outlook, have boosted the dollar by nearly 7 per cent against the euro this year.
The Organisation for Economic Cooperation and Development also said the euro zone economy would grow only 1.2 per cent this year, rather than the previously expected 1.9 per cent, and called for an interest rate cut to boost weak domestic demand.
It said the US economy would grow in line with its potential in 2005, but sagging exports, rising inflation and big deficits raise the risk of a growth-sapping spike in inflation and interest rates. The euro has also been dogged in recent days by political uncertainty.
Meanwhile, in the London market, the euro fell to a seven month low against the dollar on May 26, on persistent worries that France will reject the
EU constitution in its forthcoming referendum, while the dollar was well bid before US economic growth data. Europe’s single currency fell as far as $1.2517.
Sterling hit a seven-month low against the dollar on May 26 as gloomy data on Britain’s manufacturing sector contrasted with news the US economy grew more quickly earlier this year than first though. The pound shuttled in a narrow range against the euro, indicating dollar strength was a bigger driver of price action than sterling weakness.
The pound has fallen against both the euro and the dollar this month as indicators have pointed to a sharp slowdown in British consumer spending and a downturn in manufacturing.
On May 25, in the New York market, the dollar gained after a Chinese trade official ruled out any near-term revaluation of the yuan, a change that would allow most Asian currencies to rise. The dollar traded higher at 107.70 yen.
If China’s yuan, which is pegged at 8.28 to the dollar, is revalued, it would allow other Asian central banks to relax efforts to artificially weaken their currencies against the dollar and still keep their exports competitive with China’s. The euro rose 0.3 per cent against the yen to 135.75 yen.
In the New York market, the dollar climbed to a seven month high against the euro on May 26, as a rally in the currency gained momentum on news that the US economy had grown vigorously.
The economy expanded at a 3.5 per cent annual rate in the first quarter, with fewer imports of goods and services than estimated a month ago. The Commerce Department had previously estimated that gross domestic product had grown at a 3.1 per cent rate in the first three months of 2005.
The euro fell to $1.2494, the lowest since the third week of October 2004, according to Reuter’s data. By late afternoon trade in New York, the currency has traded back up to $1.2511, down around 0.7 per cent from late May 27.
Against the Japanese yen, the dollar was up 0.2 per cent at 107.88 yen. The dollar also touched seven-month peaks against the Swiss franc at 1.2383 francs and sterling at $1.8188.
In the London market, the euro recovered against the dollar on may 27, from the week’s seven month low. The euro has been undermined by expectations France will reject the EU constitution and by signs the euro-zone economy is underperforming the US.
DURING the week, the Pakistani Rupee remained under pressure in the open market as the demand for the currency was high. As a result of rising demand, the gap between the official and open market rates widened. On the opening day of last week, the dollar was quoted at Rs60.60 for buying and Rs6.70 for selling. The following day the rupee shed five paisa for buying and selling at Rs60.65 and Rs60.75 respectively.
