IN the local currency market, rising home remittances and improving foreign exchange reserves this week helped the rupee trim losses against the dollar.

Market analysts expect the dollar to remain range bound during the month of Ramadan due to increased inflows of overseas workers’ remittances during the month, allowing the rupee to stretch its muscles in the short-term. Some analysts, however, express their fears that the rupee is likely to come under pressure after Ramadan due to weakening macroeconomic indicators and uncertain political situation. The economic indicators are already weak.

The central bank has reported that the country’s current account showed a deficit of over $4 billion in the fiscal year that has just ended against $214 million surplus in the preceding year. Foreign investment is on decline since past four years. Foreign direct investment and portfolio investment declined by 50 per cent and 119 per cent respectively in FY2012 owing to worsening law and order and growing unrest, while fiscal deficit may jump 6.5 per cent of GDP this year due to heavy government borrowings. Moody has already downgraded Pakistan Government Bond Rating and also lowered major banks rating. All these factors are likely to exert pressure on the rupee in the long-term.

On the inter-bank market this week, meanwhile, the rupee moved in a negative direction versus dollar, trading at Rs94.54 and Rs94.57 in the first trading session, down 19 paisa on the buying counter and 17 paisa on selling counter over previous weekend’s Rs94.35 and Rs94.40. In the second trading session, however, the rupee managed to recover its overnight losses against the dollar partially as it picked up 14 paisa on the buying counter and another 13 paisa on the selling counter and last traded at Rs94.40 and Rs94.44. The parity held its overnight levels unchanged at Rs94.40 and Rs94.44 in the third trading session for the second day in a row.

In the fourth trading session, the rupee drifted lower against the dollar, sliding marginally by one paisa on the buying counter and losing two paisa on the selling counter at Rs94.41 and Rs94.46. The rupee extended its overnight weakness against the dollar in the fifth trading session for the second day in a row. It shed three paisa on the buying counter and another two paisa on the selling counter before closing the week against the dollar at Rs94.44 and Rs94.46. On overall basis, the dollar in the inter-bank dealings gained nine paisa on the buying counter and six paisa on the selling counter in rupee term this week.

In the open market, the dollar this week remain depressed and suffered marginal declines versus the rupee, moving both ways in narrow ranges. With dollar supply and demand almost in balance, the rupee did not allow the dollar to cross Rs95 mark which remains traded between Rs94.75 and Rs94.95 during the week in review.

The week commenced on a positive note. The rupee recovered 10 paisa, pushing dollar at Rs94.90 and Rs95.10 in the first trading session, down from previous week close of Rs95.00 and Rs95.20.

The rupee extended its overnight firmness and picked up another 15 paisa against the dollar in the second trading session, pushing dollar further down at Rs94.75 and Rs94.95. After recovering 25 paisa in the successive first two trading sessions, the rupee traded unchanged against the dollar at Rs94.75 and Rs94.95 in the third and fourth trading sessions. In the last trading session, the rupee, however, posted five paisa gain against the dollar, closing the week at Rs94.70 and Rs94.90. During the week in review, the rupee in the open market managed to recover 30 paisa against the dollar.

Versus the European single common currency, the rupee this week remained range bound amid no major development in the local currency market, depicting the inherent weakness of Euro against US dollar in the international financial market. The rupee commenced the week on a positive note with euro trading at Rs115.70 and Rs116.70 in the first trading session, after 10 paisa appreciation in rupee value over previous weekend’s Rs115.80 and Rs116.80. In the second trading session, however, the rupee lost its overnight firmness and drifted lower by 10 paisa as euro retained its weekend’s level and traded at Rs115.80 and Rs116.80.

In the third trading session, the rupee extended its overnight weakness versus euro for the second day in a row, shedding 10 paisa at Rs115.90 and Rs116.90, its lowest level during the week. But in the fourth trading session, the rupee managed to rebound against euro as it managed to post 30 paisa gains, changing hands at Rs115.60 and Rs116.60. Finally the week ended on a negative note as the rupee failed to retain its overnight firmness and shed 20 paisa, changing hands against euro at Rs115.80 and Rs116.80 in the last trading session.

On the international front, the dollar fell as low as 78.67 yen, its weakest level since mid-June in New York first trading session while euro rose 0.2 percent against the dollar to $1.2277, with a peak of $1.2290. It earlier fell as low as $1.2173, not far from a two-year low hit last week. In London, sterling also managed to gain 0.2 per cent against the dollar to $1.5596, despite the International Monetary Fund slashing its UK growth forecast.

On July 17, the euro hit session lows against the dollar at $1.2187 and was last at $1.2287, up 0.1 per cent on the day. The greenback firmed 0.3 per cent against the yen to 79.07 yen, a day after dropping to one-month lows. In London, sterling fell 0.4 per cent against the dollar to $1.5578, well off a high of $1.5677 hit earlier.

On July 18, the euro fell 0.2 per cent against the dollar to $1.2276, falling to session lows of $1.2215, not far from a two-year low touched last week. The dollar slipped 0.4 per cent against the yen to 78.75 yen. Sterling remained lower against the dollar, trading down 0.1 per cent at $1.5626 in London trade.

On July 19, the euro fell against the dollar, hitting session lows at $1.2227 and was last at $1.2270, down 0.1 per cent on the day. Against the yen, the dollar fell to a six-week low of 78.42 yen but last traded at 78.57 yen, down 0.3 percent on the day. Sterling/dollar was up 0.3 per cent at $1.5707 in London.

At the close of the week on July 20, the euro fell as low as $1.2143 against the dollar, its weakest level since mid-June 2010. It was last at $1.2162, down nearly 1.0 per cent on the day, declining for a third straight session and posting losses of about 1.6 per cent this week. The dollar fell 0.1 per cent to 78.56 yen. In London, sterling fell against the dollar and was last down 0.6 per cent at $1.5630, pulling away from a one-month high of $1.5738 hit a day earlier.