September 24, 2007	Monday	Ramazan 11, 1428

The local currency market witnessed mixed sentiments this week with the rupee/dollar parity moving both ways in narrow ranges. Improved inflow of remittances has helped the rupee to regain grounds versus the dollars.

On the other hand, the rupee suffered sharp losses versus the euro touching record lows during this week. In the inter-bank market, the rupee commenced the week on a firm note against the American currency as it managed to pick up two paisa over the previous weekend’s levels of Rs60.61 and Rs60.62, changing hands at Rs60.59 and Rs60.60 on easy supply of dollar on September 17.

However, the rupee quickly gave up its over night gains on the second trading day, shedding two paisa on buying counter and three paisa on selling counter to trade at Rs60.61 and Rs60.63, as demand for dollars by importers increased on September 18. The rupee regained its firmness against dollar on the third trading day as it recovered two paisa on buying counter and one paisa on selling counter, changing hands at Rs60.60 and Rs60.62 on September 19. The rupee further gained one paisa on the fourth trading day when it traded at Rs60.59 and Rs60.61 on September 20.

On September 21, the rupee moved both ways versus the dollar. It shed one paisa on the buying counter, while it did not show any change on the selling counter closing the day at Rs60.60 and Rs60.61. During the week in review, the rupee in the inter bank market recovered one paisa against the dollar on cumulative basis. The remittances from the overseas Pakistanis have reportedly increased by 21.35 per cent to $985.20 million during the first two months of the current fiscal year 2007-08. This has reduced the pressure on the rupee as dollar supply is in comfortable position to match rising demand.

On September 17, the rupee retained its weekend levels against dollar in the open market, trading at Rs60.70 and Rs60.75. The rupee was at Rs60.70 and Rs60.75 at the close of last week. On September 18, the rupee, managed to recover five paisa against dollar and traded at Rs60.65 and Rs60.70. The rupee/dollar parity was stable on September 19, as the rupee maintained its overnight level against dollar and traded unchanged at Rs60.65 and Rs60.70 on the third day of the week in review.

On September 20, the rupee, after remaining unchanged for two consecutive days, extended its overnight firmness against the dollar and recovered five paisa more to trade at Rs60.60 and Rs60.65. Finally on the fifth trading day of the week in review, the rupee was unable to hold ground versus the dollar as it lost three paisa to trade at Rs60.63 and Rs60.68 on September 21. This week, the rupee in the open market recovered eight paisa against the dollar.

Versus the European single common currency, the rupee remained almost unchanged on the opening day of the week, as it traded at its previous week close of Rs83.78 and Rs83.90. It, however, managed to gain 15 paisa and traded at Rs83.63 and Rs83.75 against the euro on the second day of the week in review. As the dollar hit a 15-year low against a basket of currencies in the international market, the euro rebounded sharply in the local currency market exerting downward pressure on rupee on the third trading day of the week in review.

The rupee shed 67 paisa in relation to single European currency in single day trading and crossed the barrier of Rs84, changing hands at Rs84.30 and 84.40 on September 19. However, on the fourth trading day of the week, the rupee managed to recover six paisa for buying and another five paisa for selling to trade at Rs84.24 at Rs84.35 against the euro. It again failed to maintain its overnight firmness versus the European single common currency on the fifth trading day and tumbled with sharp fall of 70 paisa to cross Rs85 barrier, changing hands at Rs84.95 and Rs85.05 against the euro on September 21, as the single European currency soared to a record $1.4113 in the world markets.

In the international financial markets, the dollar fell to a record low versus the euro after the Federal Reserve cut its key interest rate on the week’s opening day. Policy-makers reduced the benchmark lending rate between banks by the most since November 2002 to 4.75 per cent, the lowest level since May last year. It was the first rate cut in four years. The Fed also lowered the discount rate it charges for direct loans to banks by a half-point.

Against the dollar, the euro was 0.7 per cent higher to trade at $1.3962, after earlier trading at a record high of $1.3977 on September 17. The dollar pared some of its early gains against the yen to trade at 115.70 yen. It fell nearly 1 percent against the Canadian dollar to trade at 1.0164, a 30-year low. The high-yielding New Zealand dollar also rose 2 percent to $0.7205, while the Australian dollar was up 1.8 percent at $0.8490. Sterling fell below $2 for the first time this month. In late trading in New York, it edged 0.6 per cent lower to 1.9943.

On September 18, the dollar tumbled to an all-time low against the euro.

The euro was 0.8 per cent higher against the dollar to trade at $1.3970, after earlier trading at a record high of $1.3980. The dollar rose more than 1 percent against the Japanese currency and last traded at 116.14 yen. The greenback fell against the British pound and shed more than two per cent against the high-yielding Australian and New Zealand dollars.

High-yield currencies gained along with investor risk appetites, with the New Zealand dollar rising 2.5 per cent to $0.7236 and the Australian dollar up 2.2 per cent at $0.8522. The dollar also fell more than one per cent against the Canadian dollar to trade at 1.0134, a 30-year low. Some analysts said recent oil price highs above $80 and lower US interest rates may soon push the greenback to parity with its Canadian counterpart, a level last seen in 1976.

On September 19, the dollar rose from a 15-year low against a basket of currencies as investors bet the Federal Reserve’s deep interest rate cut the previous session will help boost a slowing US economy. The dollar fell on news of the rate cut because it diminished the greenback’s relative yield advantage, but it bounced back as investors took the view that easier monetary policy would improve US economic prospects. The dollar’s rise was helped by gains in US stocks. All three major US stock indexes were on track for a second day of gains.

In late trading, the euro fell 0.1 per cent to trade at $1.3962 while the dollar was little changed against the yen at 116.07 after trading as high as 116.33. Traders and analysts, however, said the dollar is expected to weaken in the long term once investors look again at rate differentials. The British pound fell 0.6 percent against the dollar to $2.0003. The New Zealand dollar climbed more than one per cent to US $0.7345. The dollar fell almost to parity against the Canadian dollar at C$1.0084 before recovering to trade at C$1.0145, according to Reuter’s data.

On September 20, the dollar tumbled to a record low against the euro and reached parity with the Canadian currency for the first time in 31 years on expectations of more cuts in US interest rates after this week’s sharp reduction. The sell-off started in Europe and continued later in New York as investors and analysts concluded lower benchmark rates in the world’s largest economy will hurt the return on dollar-denominated assets, diminishing the greenback’s appeal.

Against the euro, the dollar breached the key $1.40 level and almost touched $1.41 in New York. In New York, the euro had risen to a record high of $1.4099, before surrendering some gains to trade up 0.8 percent on the day at $1.4074. The dollar was down 1.2 per cent against the yen to trade at 114.56 per dollar, on track for its biggest one-day percentage decline in two weeks. The dollar touched a two-and-a-half-year low against the Swiss franc. Dollar/Swiss franc was last at 1.1715, after going as low as 1.1688, its lowest level since March 2005. The pound, however, gained against a generally weak US dollar and rose half a percent to $2.0105.

At the close of the week on September 21, the dollar edged near a record low against the euro as investors dumped the US currency after the Federal Reserve’s aggressive rate cut this week. The dollar climbed 0.2 per cent from late levels in New York to 114.85 yen recovering from a low of 113.98 yen hit the previous day. The euro edged up 0.1 per cent to $1.4091 nearing $1.4099 hit a day earlier - the highest since the single European currency was launched in 1999. The single European currency has surged around 1.6 percent in the past week, its biggest weekly gain since November. The pound was up 0.4 percent against the dollar at $2.0180.