Pakistani rupee witnessed an upward rising trend against the dollar in the local currency market this week. As a result of narrowing trade deficit and persistent increase in current account surplus, the country’s foreign exchange reserves have crossed $11 billion and this reserve build up in turn has released pressure on dollar and strengthen the rupee value.

In the inter-bank market, no unusual demand for dollar was noticed on October 6, amid sufficient inflows of dollar. The rupee managed to gain 7 paisa on the opening day of the week, with dollar trading at Rs57.65 and Rs57.67. As rising trend persisted due to smooth dollar supply on October 7, the rupee extended its gain by 2 paisa and traded at Rs57.64 and Rs57.65 against the dollar.

There was easy availability of dollar in the inter-bank market on October 8, which helped the rupee to maintain its rising trend against the dollar. It gained 10 paisa to trade at Rs57.53 and Rs57.58. On October 9, the dollar plunged to three-year lows at Rs57.45 and Rs57.50, reflecting 8 paisa gain in rupee value over its overnight level. Earlier towards the end of last month, the dollar had touched a six-month high at Rs57.90 and Rs57.95. The rupee further extended gains on October 10, supported by excess dollar supply in the absence of any major demand. It attained September 2000 level of Rs57.44 and Rs57.47 after 3 paisa gain versus the dollar.

Since the previous weekend close of Rs57.72 and Rs57.74 on October 4, the rupee has further appreciated by 28 paisa in the inter-bank market. The dollar had traded in a band of Rs57.60 and Rs57.70 for a quite sometime. Currently it has entered a new band of Rs57.44 and Rs57.47. Throughout this period the central bank has remained in the side lines. Traders are of the view that the rupee could breach Rs57.0 barrier in the next two months.

The kerb trading also observed a inter-bank like trend through out the week, with rupee/dollar parity showing persistent advancement. In first three days of trading, the rupee managed to gain 35 paisa against the dollar. It was trading at Rs57.60 and Rs57.70 on October 9, compared to previous week’s close of Rs57.95 and Rs58.05. Finally the week closed unchanged at Rs57.60 and Rs57.70 in the kerb on October 10.. During the week, the gap between the inter-bank and open market rates has significantly narrowed.

Trading in euro however, remained volatile due to persistent high demand for the European single currency. After opening the week with a 30 paisa gain against the euro an October 6, the rupee assumed downtrend in the remaining week and suffered a cumulative loss of 150 paisa, trading at Rs67.90 and Rs68.0 on October 9. Earlier the Euro had opened the week at Rs66.40 and Rs66.70 on October 6. Towards the close of the week, the rupee managed to recover some of its losses versus the Euro. On October 10, it gained 60 paisa to trade at Rs67.20 and Rs67.40. During the week, however, the rupee suffered a decline of 50 paisa over the European single currency.

Against other major currencies at the inter-bank counter, the rupee managed to gain over British pound, Singapore and Hong Kong dollar, Chinese yuan, Malaysian ringgit, Saudi and Qatari riyals, UAE dirham and Korean won. It lost ground versus Japanese yen, Swiss franc, Danish and Norwegian krones, Swedish krone, Canadian, Australian and New Zealand dollars, Thai bhat and Kuwaiti dinar,

In the international financial market, a broadly weaker dollar fell against the euro on October 6, after European Central Bank President said a decline in the US currency was “unavoidable,” and the central bank unlikely to sell euros in order to half its rise. US markets were thin because of the Yom Kippur Jewish holiday. As a result, the dollar came under heavy pressure across the board after published remarks added to traders’ inclinational to sell the US currency.

In late US trading, the euro was up 1.20 per cent on the day against the dollar, trading above $1.17. The single currency’s gains supported it against the yen, buying nearly 130 yen. Against the Swiss franc, the dollar fell below 1.32 francs, to shed 1.38 per cent on the day. The pound rose 0.40 per cent to stand near $1.67. The dollar was little changed against the yen, trading around 110.80 yen.

Sterling fought back against the dollar rising within half a cent of last week’s three-month high. Survey evidence pointing to strength in Britain’s economy gave further support to the pound, which climbed to $1.6735 in late European trade, close to peaks of $1.6760 scaled on September 30. It was steady against the euro at 69.58 pence.

The dollar retreated on October 7, plumbing depths against major currencies amid a growing perception that the nascent US economic rebound may be running out of steam. In the absence of key US economic data, traders were also on high alert about possible yen0weakening intervention by the Bank of Japan as the dollar fell to fresh three-year lows against the yen.

The dollar climbed above 110 yen briefly in late New York trading before edging lower to 109.73 yen as traders suspected Japan may have intervened in the currency markets. Traders said Japanese banks were spotted buying dollars for yen at around the 109.58 yen level, but bank of Japan officials in New York declined to comment. The dollar’s moves against the yen followed comments by Japanese Economics Minister Heizo Takenaka that while intervention is not itself an ideal policy tool, the government must ensure that currency rates do not move too rapidly.

The euro was up 0.67 per cent against t the dollar at $1.1784 after rising to a three-month high earlier in the session above $1.18. But the single currency fell against a a resurgent yen, buying about 129.17 yen down 0.58 per cent on the day. Against the Swiss franc, the dollar fell below 1.32 francs, off 0.42 per cent on the day. The pound, meanwhile, fell against the dollar to $1.6633. The US dollar also fell to new 7-year low against the Canadian dollar earlier in the session before edging up to just above the $1.33 zone. The greenback also fell to near a six-year trough against the Australian dollar, above the US $0.69 level.

Sterling came off earlier three-month highs against the dollar and also slipped versus the euro after an unexpected fall in UK manufacturing output cooled down talk of a near-term rate hike in Britain. Manufacturing output, which accounts for a fifth of the economy, contracted by 0.6 per cent on the month, the worst performance since last October, to give an annual fall of 0.8 per cent. Sterling stood at $1.6731 having risen to $1.6777 early in Europe. Against the euro it was down a third of a per cent at 70.42 pence.

On October 8, the dollar slipped against most other major currencies amid a growing belief the greenback will have to weaken to narrow the US current account deficit and that a dollar fall has implicit official sanction. Traders also remained on alert for yen-weakening intervention by the Bank of Japan as Japanese officials continued their jawboning overnight against the yen’s rapid movements. The dollar came under some pressure late in the New York session as US stock retreated. In the New York the euro was up 0.3 per cent to $1.1801, after rising to within 1 cent of its record high earlier in the session. Against the yen, the dollar fell 0.3 per cent to 109.53 yen. Against the Swiss franc the dollar was at 1.3138 francs, down 0.2 per cent on the day. The pound was virtually flat at $1.6619.

Sterling hung back more than a cent from a three-month peak of $1.6777 set on October 7 and slid to a 10-week low against the euro for a second straight day, at 71.17 pence per euro.

On October 9, the dollar weakened against the yen but came off a three-year low hit in European trading, as players watched cautiously for signs of any further intervention by Japan to weaken its currency to help exports.