HIGH payments in the final quarter of the current fiscal year are building pressure on the rupee. As a result of rising demand for dollars, the country's foreign exchange reserves fell to $13.577 billion. According to the official statistics, the imports of the country for the period jumped by 8.9 per cent to $22.420 billion against only 3.5 per cent growth in exports to $12.435 billion during the first nine months of the current year.

Basically higher imports are increasing the country's trade deficit. The country's trade deficit has widened by 15.1 per cent to $9.985 billion during the first three quarters of the current fiscal year. If this trend continues in the coming months, it would have a serious impact on the country's balance of payment, which will have a negative impact on the health of the rupee according to experts.

The increase in foreign direct investment and growth in remittances has restricted the rupee from sharp declines against the dollar so far, which is being caused by the burgeoning trade deficit. Soaring trade deficit has already aggravated the situation of country's negative current account balance threatening to even offset the positive impact of foreign direct investment and inflows by the overseas Pakistanis. The current account deficit has already crossed $5 billion mark.

This week, a fluctuating trend was witnessed in the local currency market, with the rupee sharply moving both ways versus the American and European currencies. Over the past 12 months, the rupee has depreciated against the dollar by 1.2% in the inter bank market and by 1.4 per cent in the open market. Against the Euro, the rupee has declined by 11.5 per cent.

The rupee commenced the week on a stable note as it did not show any significant change against the dollar in the inter bank market, where it was seen changing hands at Rs60.75 and Rs60.76 on April 9. However, falling trend in the rupee/ dollar parity re-emerged on the following day as the rupee shed four paisa against the dollar on the second day of the week in review, when it traded at Rs60.79 and Rs60.80.

Both foreign and local banks bought nearly 200m dollars to meet the payment requirements on April 11. As a result, the rupee lost two paisa against the dollar on the third trading day of the week trading at Rs60.80 and Rs60.82. Towards the close of the day, the US currency at one point even touched the new high at Rs.6088 on rising demand. On the fourth day, the rupee managed to give up its overnight weakness against the dollar and recovered three paisa and traded at Rs60.77 and Rs60.79 on balanced demand and supply of the US currency.

Despite the rising demand of dollars by the corporate sector the rupee managed to gain sharply on the fifth day of trading. The rupee further strengthened against the dollar and extended its overnight firmness. It gained 10 paisa in the single day rally, changing hands at Rs60.67 and Rs60.68 on April 13. During the week in review, the rupee in the inter bank market recovered eight paisa versus the dollars.

In the open market, the rupee failed to come out of its previous week’s weakness on improved dollar demand due to higher payments on the first day of trading. However, it remained traded at its last weekend’s levels of Rs60.70 and Rs60.80 on April 9. On April 10, the rupee suffered fresh decline of two paisa, changing hands at Rs60.72 and Rs60.82 against the dollar.

The rupee extended its overnight weakness on the third day of the week in review, shedding three paisa against the dollar to trade at Rs60.75 and Rs60.85 on April 11. The rupee weakness persisted on the fourth day of the week on rising demand for dollars, resulting in two paisa decline on April 12, when the dollar traded at Rs60.77 and Rs60.87.

On April 13, the rupee continued its downtrend versus the dollar further shedding three paisa. The dollar traded at Rs60.80 and Rs60.90 at close. Higher Import payments increased the demand for dollars, which negatively impacted the rupee on the fifth day of the week in review. This week, the rupee was nearing to break Rs61 barrier in the open market. It lost 10 paisa against the dollar on cumulative basis.

Versus the European single common currency, the rupee recovered seven paisa and traded at Rs80.71 and Rs80.81 on the opening day of the week in review. The rupee had closed last week at Rs80.78 and Rs80.88 against the euro. However, the rupee managed to recover its lost ground versus the euro on the second trading day. It gained 40 paisa and traded at Rs81.11 and Rs81.21 on the back of dollar's fall in the world markets on April 10.

On April 11, the rupee further recovered four paisa, changing hands at Rs81.15 and Rs81.25 against the European single common currency. But the trend reversed on the fourth day as the euro bounces back and the rupee unable to hold ground posted fresh losses of 29 paisa. The rupee traded at Rs81.44 and Rs81.54 against the euro on April 12.

The single European currency heading to cross the barrier of Rs82 this week, as the rupee shed 20 paisa against the euro on April 13. The euro traded at Rs81.69 and Rs81.79 versus the rupee on the fifth trading day. During the week in review, the euro displayed strength over the rupee, amid sharp fluctuations. The rupee lost 91 paisa against the European single common currency on cumulative basis as compared to previous week close.

On the international front, volumes were lower, with most European markets closed for Easter, and the US economic calendar was bare. The dollar traded near a six-week high against the yen on April 9, as a strong US job data tempered investors' expectations of a near-term interest rate cut. The dollar slowly inched up against most major currencies.

The dollar was little changed at 119.32 yen, near a post-jobs report peak of 119.39 on last week close, its highest since February 27. The euro was 0.1 percent weaker at $1.3360, while sterling fell 0.2 per cent to $1.9616. The dollar rose earlier to about a 1-month high of 1.2284 and the Swiss franc also slid 0.2 per cent against the euro to trade at 1.6384.

On April 10, the dollar sank to a two-year low against the euro on persistent worries about the health of the US housing market and concerns a trade dispute between the United States and China is escalating. The euro rose as high as 160.10 yen, a record since the currency's launch in 1999. In New York, it traded back down to 159.98 yen. The dollar was down 0.2 per cent at 119.11 yen, off a six-week high of 119.39.

Against the dollar, the euro was up 0.5 per cent at $1.3425, after climbing to a peak of $1.3457, the highest level since March 2005. The pound rose versus a pressured dollar as concerns about brewing tension between the United States and China over trade and nervousness before a Group of Seven meeting at the end of the week outweighed a stronger than expected US jobs report. The pound was up 0.5 per cent at $1.9726.

On April 11, the yen touched a record low against the euro, as investors took comments by the International Monetary Fund on carry-trades as a green light to keep borrowing yen to fund purchases of higher-yielding currencies. In New York, the dollar was up 0.2 percent against the yen at 119.30 yen. The euro was trading little changed on the day against the dollar at $1.3426.

The dollar also rose to a session high of 1.2225 Swiss francs and later traded at 1.2203. Sterling rose to a 1-week high versus the dollar. It rose as high as $1.9817, hitting a one-week high, and stopping just five ticks short of a 2-1/2 month peak set earlier this month. Finally it closed at $1.9756, up around 0.2 percent.

On April 12, the US dollar touched a two-year low against the euro and fell against most other major currencies on expectations for euro zone interest rates to rise further in coming months. The euro was trading up 0.4 per cent at $1.3487 after hitting $1.3505 earlier, the highest since January 2005. It touched an intra-day record high of $1.3670 in December 30, 2004. The dollar was down 0.25 per cent at 119.04 yen. The pound rose 0.2 per cent at $1.9790, approaching the 2-1/2 month high of $1.9822 set earlier this month.

At the close of the week on April 13, the euro hit a two-year high against the dollar on expectations that euro zone interest rates will soon rise, while investors awaited a meeting of Group of Seven finance officials later in the day. The dollar slipped around 0.2 percent to 118.85 yen, pulling further away from 119.55 yen touched earlier in the week, its highest since late February. Sterling hit a 2-1/2 month high against the dollar. It was up a third of a percent against a broadly weaker dollar at $1.9856, near an earlier 2-1/2 month peak of $1.9887.