Chart by RA

MOUNTING dollar demand amid speculative trading in the local currency market brought the rupee under heavy pressure versus the dollar and the euro last week.

The rupee as a result plunged against the dollar and euro to fresh lows in the interbank as well as open market, necessitating the SBP intervention. On the interbank market, the rupee posted the biggest single day loss against the dollar — Rs1.88 on the buying-counter and Rs1.91 on the selling-counter — in the first trading session that enabled the dollar to climb to its highest level since October 30, 2014 at Rs103.90 and Rs103.95.

The rupee continued its downslide for the second day in a row, shedding 38 paisas on the buying-counter and losing another 35 paisas on the selling-counter. The dollar surged to Rs104.28 and Rs104.30 as the rupee plummets to almost 18-month low.

After tumbling against the dollar by Rs2.26 in the first two trading sessions, the rupee in the third trading session recovered partial losses on SBP intervention. It posted 13 paisas gain on the buying-counter and ten paisas gain on the selling-counter that forced the dollar to descend to Rs104.15 and Rs104.20.

The dollar appreciated by 198 paisas against the rupee in interbank dealings last week

The rupee further gained 15 paisas in the fourth trading session, which dragged the dollar further down to Rs104.00 and Rs104.05. As a result of SBP intervention, the gap in the differential between the interbank rates and open market rates narrowed to 50 paisas on the buying-counter and 70 paisas on the selling-counter from Rs1.58 and Rs1.76 in the week.

The rupee closed the week on a happy note as it traded unchanged against the dollar on the buying-counter while inching up by three paisas on the selling-counter at Rs104.00 and Rs104.02 in the fifth trading session. The rupee managed to recover 28 paisas against the dollar on the buying-counter and 27 paisas on the selling-counter in the last three sessions.

On week on week basis, however, the dollar in the interbank dealings gained Rs1.98 against the rupee. During August, the rupee depreciated by 2.1pc against the dollar on the interbank market, touching its highest level at Rs101.79 and Rs101.80 and lowest level at Rs104.28 and Ra104.30.

The market witnessed an unprecedented rise in euro demand last week. The rupee posted a single-day fall of Rs1.40 on the buying-counter while plunging by 90 paisas on the selling-counter at Rs118.60 and Rs119.10 in the first trading session from the previous weekend’s level of Rs117.20 and Rs118.20.

During the week in review, the rupee managed to gain Rs2 versus euro in the last two trading sessions after shedding Rs1.80 in the first two trading sessions. Consequently, the euro suffered 20 paisas loss against the rupee on week over week basis.

In August, however, the rupee weakened against the euro, depreciating by 4.2pc.

Published in Dawn, Economic & Business, August 31st, 2015

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