November 26, 2007	Monday	Ziqa’ad 15, 1428

Both the American and European currencies continued to exert downward pressure on the rupee in the local currency market throughout this week. The local currency touched its record lows during the week. The timely interventions by the State Bank of Pakistan (SBP), however, helped the rupee to minimise its losses against the dollar in both interbank and open market, but it failed to resist the rupee from crossing Rs61 mark against the dollar and Rs91 barrier versus the euro.

The imposition of emergency caused negative consequences in the currency market and forced the rupee to three-year low in relation to the dollar. The unusual demand for the US currency emerged after the increased dollar buying for oil payments and withdrawal of special convertible rupee accounts (SCRA) money. At the same time, the foreign investors withdrew nearly one billion dollars from the country’s share market, reflecting a sign of no confidence over the shaky political situation.

The rupee commenced the week on a disappointing note, as it depicting a sharp decline against dollar in the currency market on November 19. Rising import payments, especially for oil, together with outflows from the financial markets because of political uncertainty, have resulted in higher demand for dollar in recent days. Investors indicated nervousness on uncertain political situation that prevailed after the imposition of emergency in the country. In the interbank market, the rupee extended its previous week’s losses versus the dollar, shedding seven paisa to trade at Rs61.20 and Rs61.22 on dollars short supplies. The rupee had closed last week at Rs61.13 and Rs60.15.

The rupee weakness prevailed on the second trading day due to high demand for dollar. In order to resist the rupee from falling sharply, the central bank intervened in the inter bank market for the second time to give support to the weak rupee and help minimize its losses against dollar in the interbank market. The State Bank intervention in the local currency market saved the rupee from falling further on November 20. The rupee managed to gain 12 paisa on the buying counter and another 15 paisa on selling counter. The dollar was seen changing hands at Rs61.05 and Rs61.10 at close.

The State Bank of Pakistan again intervened in the local currency market on November 21, the second in a week and third within a fortnight to help the rupee maintain its firmness against the bullish American currency in the inter bank market. The intervention helped the rupee to recover another 15 paisa for buying and 18 paisa for selling to trade at Rs60.90 and Rs60.92 against the dollar.

However, the rupee failed to hold its firmness against the dollar on November 22. Rush for dollars to cover increased import payments exerted downward pressure on the rupee. Higher oil prices pushed the dollar demand up in the local market. The rupee gave up ten paisa on the buying counter and another 28 paisa on the selling counter and traded at Rs61.00 and Rs61.20.

Demand for dollars by the importers remained high due to higher payment bills following the upward trend in the oil prices in the international market on the fifth trading day of the week. The rupee, however, managed to resist sharp decline against dollar. In the interbank market the rupee lost seven paisa for buying but it managed to gain 11 paisa for selling, changing hands versus the dollar at Rs61.07 and Rs61.09.

In the open market, the rupee continued to suffer from dollars’ strength and shed five paisa to trade at Rs61.35 and Rs61.45 on the first day of the week in review after closing last week at Rs61.30 and Rs61.40. The rupee continued its decline versus the dollar on the second trading day further losing five paisa on the buying counter while remaining unchanged on the selling counter. The dollar traded at Rs61.40 and Rs61.45 on November 20.

On the third trading day, the local currency managed to show some strength against the American currency. It recovered ten paisa for buying and five paisa for selling on increased supply of dollars following central bank’s intervention in the market. The rupee on November 22 was seen changing hands versus the dollar at Rs61.30 and Rs61.40. The rupee continued its upward trend versus the dollar on the fourth day as it further gained five paisa on the buying counter and10 paisa on the selling counter to trade at Rs61.25 and at Rs61.30 on November 22.

The rupee maintained its overnight gains against dollar on November 23, as it managed to recover ten paisa to close the week at Rs 61.15 and Rs 61.20 against the dollar. This week the rupee in the open market managed to recover 15 paisa against the dollar despite remaining under demand pressure. Heavy intervention by the State Bank helped the rupee to recover from sharp losses.

Versus the European single common currency, the rupee gained five paisa on the week’s opening day and traded at Rs89.50 and Rs89.60 as against last week close of Rs89.55 and Rs89.65 on November 19. The rupee maintained its overnight level against the on November 20, and continued to trade at Rs89.50 and Rs89.60. On November 21, however, the rupee posted a sharp decline versus the euro, shedding 140 paisa in a single day, touching the new lows at Rs90.90 and Rs91.00.

The rupee continued its slid versus the European common currency on the fourth day further losing five paisa and changing hands at Rs90.95 and Rs91.05, as euro gained strength in the world market. It further lost 25 paisa more to trade at Rs91.20 and Rs91.30 on November 23. During the week in review, the rupee shed 165 paisa against the European single common currency.

On the international front, the dollar declined against the yen on the opening day of the week in review. However, it held steady versus the euro as a global rout in stock markets and higher oil prices raised concern about the health of the US economy and left investors wary of risky trades. Reports that Middle East oil exporters may discuss abandoning fixed exchange rates to the dollar next month also added to negative greenback sentiment as did continued market expectations for lower US interest rates.

But increasing risk aversion helped keep the dollar steady against the euro and a basket of major currencies as investors repatriated money from overseas trades. Investors grew particularly cautious after the news that US banking giant Citigroup would likely face more mortgage-related losses next year. As a result, in late New York trading on November 19, the dollar fell 1 percent to 109.82 yen, edging back toward an 18-month low of 109.12 yen hit last week.

The euro fell one per cent was little changed against the dollar at $1.4663. Most analysts expect dollar pressure against the euro to pick up again, as the greenback faces a number of obstacles. The greenback earlier hit a 12-year low of 1.1155 Swiss francs. A fall beneath 1.11 would mark a record low.

The high-yielding Australian dollar, on the other hand, shed 0.8 percent against the greenback. The US dollar rose more than one per cent against its Canadian counterpart. The pound was down 0.1 percent against the dollar at $2.0512.

On November 20, the dollar slid to a record low versus the euro after the Federal Reserve said a housing slump, tighter credit conditions and high oil prices would likely slow US economic growth in 2008.

The euro extended gains, rising one per cent to a record $1.4822. It was on track for its biggest one-day gain versus the greenback in a year and last traded at $1.4810.

The dollar traded 0.1 percent higher at 109.90 yen. The pound was up 0.66 per cent against the dollar at $2.0627.

On November 21, the yen surged to its highest level against the dollar in more than two years as investors pared back exposure to risky trades on worries about credit market losses and the health of the US economy. The dollar also hit a record low against the euro for the second straight day.

The US currency fell below 109 yen for the first time since June 2005 as global stocks weakened and oil prices pushed toward $100 a barrel.

The euro has gained more than 6 percent on the dollar since the Federal Reserve began cutting rates in mid-September. It hit a record high of $1.4856 before easing to $1.4844, up 0.2 per cent from a day earlier. The dollar fell as low as 108.27 yen and last traded at 108.65 yen, down 1.2 per cent. Against the Swiss franc, the dollar hit an all-time low for a second straight session, dipping to 1.1025 francs. The Australian dollar fell 2.3 percent against the greenback. Sterling was down by 0.3 percent at $2.0592.

With the United States marking the Thanksgiving holiday on November 22, the dollar hit a record low against the euro and a basket of currencies in Tokyo.

It rose to 108.99 yen pulling away from the 2-1/2 year low of 108.25 yen hit on the preceding day. The euro hit a record high of $1.4873. It later trimmed its gains to stand at $1.4860 steady from late US trading. The dollar remained close to an all-time low struck earlier against the Swiss franc at 1.1006 francs. The pound was steady at $2.0645.

At the close of the week on November 23, the yen hit a 2-1/2-year peak against the dollar. It was down 0.7 percent against the yen at 107.80 yen, the lowest since June 2005.

The euro was trading around $1.4920, up 0.45 per cent on the day, having earlier hit a record high of $1.4968 on the electronic trading system.

The dollar was down 0.6 percent against the Swiss franc at 1.0937 franc, bouncing up a little from a record low of 1.0889 franc. The pound was down 0.5 per cent versus the dollar at $2.0535.