Increased dollar supply together with low dollar demand from the corporate sectors towards year-end has eased the buying pressure over the US currency in the local currency market, which wore a dull look this week. Market leaders expect the rupee to strengthen further in coming days.

The rupee managed to retain it week-end level versus the dollar on the opening day of the week, and traded unchanged at Rs.59.89 and Rs.59.91 on December 19 in the inter bank market. On December 20, however, sufficient dollar supply due to increased inflows of remittances from overseas Pakistanis ahead of Eid-ul-Azha helped the rupee to gain five paisa, thereby changing hands at Rs.59.84 and Rs.59.86 against the dollar.

On December 21, the rupee extended further gains against the dollar on continued rise in supply of dollars, and picked up six paisa for buying and another four paisa for selling to trade at Rs.59.78 and Rs.59.80. However, it gave up some of its firmness on December 22, as it lost four paisa for buying and three paisa for selling on sporadic buying of dollar, which traded at Rs.59.82 and Rs.59.83 on rising demand for the US currency.

The rupee was stuck in a tight range on December 23, amid strong demand and supply position but due to comfortable dollar supply it managed to hold its overnight level for buying at Rs.59.82, while shedding one paisa for selling at Rs.59.84. During the week, the rupee in the inter bank market managed to recover seven paisa versus the dollar compared to its previous week close of Rs.59.89 and Rs.59.91.

In the open market, downtrend in the rupee/dollar parity was witnessed on the week’s opening day, as the rupee lost five paisa versus the dollar to trade at Rs.60.15 and Rs.60.25 on December 19. It closed last week at Rs.60.10 and Rs.60.20. Higher demand for dollar on the day kept the local currency under pressure.

On December 20, the rupee further gained five paisa for selling, but remained at its overnight level for buying versus the dollar, which traded at Rs.60.15 and Rs.60.20. The rupee continued its upward trend versus the dollar on December 21 and recovered five paisa more to trade at Rs.60.10 and Rs.60.15.

The rupee made a handsome recovery versus the dollar in the open market on December 22, on increasing supply of the US currency. It posted a fresh gain of five paisa to trade versus the dollar at Rs.60.05 and Rs.60.10. On December 23, the rupee expanded its gains on significant improvement in the supply of dollars, due to increased inflows from overseas Pakistanis, amid low buying interest and significant fall in importers demand for dollar.

Consequently the rupee made a sharp recovery in the open market, gaining 25 paisa for buying and 20 paisa for selling to trade at Rs.59.80 and Rs.59.90 on the fifth day of the week in review. Over the previous week end, the rupee this week made a smart recovery of 30 paisa versus the dollar in the open market.

Against the euro, the rupee lost 10 paisa on the opening day of the week in review, changing hands at Rs.71.90 and Rs.72.00. However, it gained 30 paisa more versus the European single common currency on the second day of the week to trade against the euro at Rs.71.60 and Rs.71.70. The rupee continued its recovery versus the euro for the third successive day on December 21, and gained 70 paisa versus more to trade at Rs.70.90 and Rs.71.00.

The rupee recovered another 40 paisal versus the euro on December 22 and traded at Rs.70.50 and Rs.70.60. On December 23, the rupee gave up its four days firmness versus euro, shedding five paisa to trade at Rs.70.55 and Rs.70.65. Over the week, the rupee, however, managed to recover 145 paisa against the European single common currency. Last week the euro was quoted at Rs.72.00 and Rs.72.10.

On the international front, the dollar appreciated broadly on December 19, particularly against high-yielding currencies in what analysts attributed more to position adjustments as year-end approaches than anything else. Its moves against the euro, yen and Swiss franc were confined to much narrower ranges.

The yen has been under pressure most of this year as interest rate differentials between Japan and other developed countries, especially the United States, widened, prompting investors to sell yen for other high-yielding currencies. In the past few sessions, however, the yen rebounded sharply, with the dollar last week suffering its biggest one-week loss against the Japanese currency in six years.

The euro was flat at $1.2005 right in the middle of a $1.19-$1.21 range the European bank trader expects it to hold for the rest of the year, while the dollar was up 0.3 percent against the broadly weak yen at 116.05 yen. Sterling was down 0.6 percent at $1.7620.

On December 20, the dollar soared with analysts citing upbeat US housing data as an excuse for traders to drive the currency sharply higher in a technically driven and relatively illiquid session. It chalked up intraday gains of around 1 percent or more against the euro, yen and Swiss franc and scored a four-week high against the Australian dollar.

In late trading, the euro was at $1.1860, down 1.2 percent from its previous day’s level, and sterling was 0.5 percent weaker at $1.7530. The dollar, however, was up 0.9 percent against the yen at 117.10 yen and up 1.2 percent against the Swiss franc at 1.3090 francs. In percentage terms, the dollar posted its biggest one-day rise against the Swiss franc in five months, while the euro’s decline was its steepest one-day fall against the dollar in five months.

On December 21, the dollar mostly strengthened as dealers squared and covered positions in thin year-end trading. In late trade, the euro was down 0.3 percent from a day earlier at $1.1832. Chart support at around $1.18 has so far saved the euro from further losses. The dollar hit one-week highs against the yen at 117.49 yen before easing to 117.30 yen, still up 0.2 percent on the day.

Against the Swiss franc, the dollar was up 0.4 percent at 1.3130 francs while sterling was down 0.6 percent at $1.7434. Earlier in the trading day the euro got a brief boost after sources said the European Central Bank was likely to raise interest rates at least twice in 2006, while sterling fell after Bank of England minutes stoked talk of a UK rate cut.

On December 22, the dollar weakened against the euro and yen in light pre-holiday trading after an inflation gauge favoured by the Federal Reserve came in softer than expectations. In late

trading, the euro was up around 0.3 percent on the day at $1.1871, according to Reuters data. The euro was at a session low around $1.1815 before the PCE data, and later drifted up to a session high around $1.1900.

Against the yen, the dollar fell to 116.68 yen, down 0.5 percent from a day earlier. Against the Swiss franc, the dollar was down 0.2 percent at 1.3115 francs. Sterling regained some ground as US trading unfolded but remained weaker after data showed Britain’s current account deficit rose to a record high. It was down 0.4 percent to $1.7365.

At the close of the week on December 23, the dollar held firm after falling the previous day on tame US inflation data and less hawkish comments from a Federal Reserve official, which cooled expectations for a rate hike beyond January. The greenback has rallied this year on expectations for dollar-supportive rate hikes, but investors expect the Fed might be close to ending its 18-month monetary tightening.

The dollar was firmer on the day against the euro at $1.1844 and flat versus the yen at 116.66. Trading was thin with Tokyo markets closed and Europe winding down for Christmas holidays. Sterling dipped slightly against the dollar in holiday-thinned trade, holding close to lows hit the previous day. The pound was down 0.17 percent on the day at $1.7377. It fell to $1.7336 on December 22, its lowest since December 8.