The demand for dollars was higher in both open and inter bank markets last week.
Money market experts said that the rising demand for dollars by importers pushed the rupee down as higher bills payment forced them to make huge buying of US currency. According to the recently released State Bank of Pakistan’s annual report, the rupee exhibited a mixed trend versus US dollar in the previous year, depreciating by 1.14 per cent in the first half but seen appreciating by 0.81 per cent in the second half of the FY 2007.
In the first half, the widening trade deficit drove the rupee depreciation, while in the second half, improved market related inflows helped the rupee to regain most of its lost ground, consequently the rupee saw a net depreciation of 0.31 per cent during the 2007 financial year. During the first four months of the current fiscal year, the rupee has depreciated against the dollar by 0.6 per cent in the inter bank market and appreciated by 0.3 per cent in the open market. However, the rupee has suffered the sharpest decline of over six per cent against the euro.
Mixed sentiments were observed in the local currency market this week. The rupee moved both ways though strong demand for dollar persisted. In the inter bank market, the rupee commenced the week on a quiet note as it held its weekend level against the dollar and traded unchanged at Rs60.70 and Rs60.72 on October 29. On October 30, the rupee, however, managed to recover one paisa on buying counter and two paisa on selling counter to trade at Rs60.69 and Rs60. 70.
On October 31, the rupee weakened against dollar, shedding three paisa to trade at Rs60.72 and Rs60.73 in the interbank market, as importers’ demand was high. Even continued inflows of remittances failed to restrict the rupee from the slide, caused by the surge in the buying of dollar. Falling trend persisted on November 1 as the rupee continued its slide against the dollar and shed two paisa, changing hands at 60.74 and 60.75. Rising demand for dollars by importers continued to exert downward pressure.
High demand for dollar kept the rupee under pressure on November 2. Reportedly, banks bought nearly $80-90 million to meet the importers’ demand. As a result, bearish trend persisted in the inter bank market on the fifth day of the week in review. The rupee lost four paisa against dollar on buying counter and five paisa on selling counter, changing hands at Rs60.78 and Rs60.80. During the week in review, the rupee in the inter bank market lost eight paisa against the dollar
In the open market, the rupee/dollar parity remained intact and traded unchanged at its previous weekend levels of Rs60.70 and Rs60.75 on the first trading day of the week. Firmness in the rupee/dollar parity persisted on the second trading day as the rupee maintained a stable trend versus the dollar trading at previous week’s level. The rupee, however, came under downward pressure against the dollar on the third trading day of the week and shed two paisa, changing hands at Rs60.72 and Rs60.77 on October 31.
On the fourth trading day of the week, the rupee further shed one paisa on selling counter but it did not show any change in on the buying counter, trading at Rs 60.72 and Rs60.78 against the dollar on November 1. The rupee did not show any change in relation to dollar and traded at its previous day’s level of Rs60.72 and Rs60.78 on the fifth trading day of the week in review. Over the past week, however, the rupee in the open market lost two paisa versus the American currency.
Versus the European single common currency, the rupee continued its downtrend on October 29 and lost 12 paisa to trade at Rs87.10 and Rs87.20, against previous week close of Rs86.98 and Rs87.08. On October 30, however, it managed to gain five paisa, changing hands against the euro at Rs87.05 and Rs87.15. The recovery by the rupee proved short lived as it posted a sharp slid on October 31, losing 20 paisa against the euro in a single day trading at Rs87.28 and Rs87.38.
The rupee extended its weakness against the euro on November 1 and lost another 27 paisa to trade at Rs87.55 and Rs87.65. However, it remained unchanged versus the euro on November 2 and traded at its overnight levels for the second consecutive day. This week, the rupee shed 47 paisa versus the European single common currency on cumulative basis.
In the international financial markets, the dollar fell to record lows against the euro and a basket of major currencies for the second consecutive session on the opening day of the week, as dealers bet the Federal Reserve will reduce interest rates this week and signal more cuts to come. Overall sentiment remained bearish on the dollar.
In New York, the euro was up 0.2 per cent at $1.4422, having earlier traded at an all-time high of $1.4438, according to Reuters data, and taking its year-to-date gains to more than nine per cent. Against the yen, the dollar rose 0.4 per cent to 114.64 yen. Sterling strengthened against the dollar as it peaked at $2.0627, the highest in three months before settling at $2.0605 to within half a cent of a fresh 26-year. It was up 0.4 percent on October 29.
A weak dollar helped drive oil prices to a record peak above $93 a barrel and sent gold to a 28-year high above $794 an ounce, boosting the Australian dollar to its highest levels in 23 years and the Canadian dollar to a 47-year peak. The high-yielding Australian dollar vaulted as high as $0.9272, the highest since 1984, before trading back down to $0.9205, still up 0.2 per cent. Against the Canadian dollar, the greenback tumbled as low as C$0.9516, a 47-year low. The pair last traded at C$0.9530, down 0.8 per cent.
On October 30, the dollar fell to a record low against the euro for the third consecutive session as the market looked ahead to the outcome of a Federal Reserve meeting with most expecting an interest rate cut. The euro rose to a fresh record high of $1.4441 before settling at $1.4432. It has risen around 10 cents since mid-August, when a crisis in the US subprime mortgage market began to spread to other areas of the economy.
Against the Swiss franc, the dollar fell to the lowest in 2-1/2 years, at 1.1583 francs. Sterling rose to a 26-year high of $2.0695 before backtracking to $2.0670, up 0.2 percent on the day. The US dollar was virtually flat against the Canadian dollar, trading at C$0.9525 after touching a 47-year low of C$0.9513 on the previous day.
On October 31, the dollar fell to a record low against the euro after the Federal Reserve cut its benchmark interest rate by a quarter percentage point and said the pace of US economic growth will slow this year.
The euro jumped to $1.4504, a record high, up nearly 10 percent so far this year. It later settled back at $1.4466, up 0.2 per cent on the day. Sterling rose against the dollar to a 26-year high at $2.0822, up 0.8 per cent.
The Canadian dollar and the Australian dollar have been the biggest gainers on the US dollar since a crisis in the risky US subprime mortgage market began to spread to other areas of the economy in mid-August. Both have risen more than 12 percent since then. The Canadian dollar climbed to a fresh 47-year high. The US dollar fell 0.6 percent to C$0.9460. The Australian dollar rose to a 23-year high at $0.9338 and was up 4.9 per cent in October.
On November 1, the yen rose broadly after brokerages downgraded two of the largest US banks, stinging equities and sapping investor appetite for risk. The dollar fell 0.6 percent against the yen to 114.58 yen, after falling as low as 114.50 yen. The euro also slipped 0.3 percent against the dollar to $1.4439, a day after it hit a record peak above $1.45, according to Reuters data.
The Australian dollar fell two per cent versus the greenback to $0.9137 after surging to a 23-year peak above $0.9340 a day earlier. The New Zealand dollar tumbled 1.65 percent to $0.7591. Trading in the US dollar against currencies outside the yen was subdued ahead of the October US employment report. Sterling scaled a 26-year peak versus the dollar for a third consecutive day. It was steady at $2.0803 after rising as high as $2.0851.
At the close of the week on November 2, the yen was steady against the dollar, recovering from a brief dip as sliding stock markets kept investors on edge about the credit market troubles before a US jobs report. The dollar was flat at 114.60 yen pulling back from a session high just below 115 yen. The euro was up 0.1 per cent against the dollar at $1.4435. Sterling was trading at $2.0829, up 0.13 percent on the day and about half a cent below 26-year highs set a day earlier.
The demand for dollars was higher in both open and inter bank markets last week.
