The deteriorating situation on both political and economic fronts forced the rupee to surrender its previous week’s gains against the dollar this week. Last week, timely intervention by the State Bank of Pakistan had saved the rupee from crossing Rs75 barrier in the inter bank market.

The central bank’s measures proved successful in arresting the alarming situation in the local currency market arising from panic dollar buying and brought the rupee/dollar parity down in Rs69 range in the inter bank as well as open market. But this week, the rupee again came under pressure after stock market crash lead to law and order situation amid prevailing economic and political unrest.

In the inter bank market, the rupee commenced the week on a positive note, moving both ways against dollar. It gained 32 paisa for buying and another 31 paisa for selling and traded at Rs69.60 and Rs69.65 on July 14, after closing previous week at Rs69.92 and Rs69.96. However, on the second trading day of the week in review, the rupee gave up its overnight gains against the US currency as importers continued dollar buying to meet the payment requirement. The rupee shed 70 paisa on the buying counter and another 75 paisa on the selling counter to trade at Rs70.30 and Rs70.40 against the dollar on July 15.

On July 16, uncertainties over the political and economic fronts pressured the rupee down against dollar on the inter-bank market, which shed 70 paisa on the buying counter and 65 paisa on the selling counter, changing hands versus the dollar at

Rs71.00 and Rs71.05. Stock market crash continued to exert pressure on the rupee in the inter bank market on July 17. The rupee lost 105 paisa in single day trading and crossed Rs72 mark this week. It closed the day at Rs72.05 and 72.10.

However, sharp recovery was seen on the inter-bank market on the closing day of the week inv review as supply of dollars improved in the inter bank market after local stock market staged a modest recovery. The rupee in the inter-bank market managed to gain 105 paisa on the buying counter and another 100 paisa on the selling counter, changing hands versus the dollar at Rs71 and Rs71.10 on July 18. During the week in review, the rupee in the inter-bank market lost up to 114 paisa against the dollar.

In the open market, the rupee commenced the week on a dismal note, posting sharp fall of 110 paisa and changing hands at Rs70.80 and Rs71.20 against the American currency on July 14. The rupee had closed last week at Rs69.70 and Rs70.10. It, however, managed to recover from its overnight weakness on July 15 as it gained 60 paisa on the buying counter and 80 paisa on the selling counter to trade at Rs70.20 and Rs70.60. Unable to hold its firmness over the dollar on July 16, the rupee posted fresh losses of 100 paisa and traded at Rs71.20 and Rs71.60.

The rupee continued its fall against dollar due to strong demand on July 17, making fresh losses of 50 paisa for buying and 70 paisa for selling to trade at Rs71.70 and

Rs72.30. On July 18, it slipped further, falling 20 paisa for buying and 10 paisa for selling to trade at Rs71.90 and Rs72.40. This week, the rupee in the open market lost up to Rs2.40 against the dollar on cumulative basis.

Versus the European single common currency, the rupee assumed a fluctuating trend. It shed five paisa and traded at Rs110.95 and Rs111.15 on the opening day of the week. The rupee had ended previous week at Rs110.90 and Rs111.10. On the following day, however, the rupee managed to rebound against the euro, gaining 35 paisa and trading at Rs110.60 and Rs110.80 on July 15. But it was unable to retain its overnight firmness versus the European single common currency on July 16, when it was seen changing hands at Rs111.25 and Rs111.45 after registering a sharp fall of 65 paisa in single day trading.

The rupee further extended its weakness versus euro on July 17. It posted another sharp decline during the day losing Rs1.20 to trade at Rs112.45 and Rs112.55. On July 18, the decline against the European single common currency continued, as the rupee further shed 45 paisa on the buying counter and 55 paisa on the selling counter, closing the week at Rs112.90 and Rs113.10. During the entire week, the rupee lost Rs2 against euro.

In the international financial markets, the dollar rose from a near record low against the euro on the week’s opening day after the United States announced an emergency plan to restore confidence in mortgage finance companies Fannie Mae and Freddie Mac. The plan helped calm market concerns about the health of the US financial and housing sectors. In New York, the euro was down 0.2 percent at $1.5911 after slipping to $1.5842. The dollar fell 0.1 percent to 106.10 yen. The pound was trading steadily against the dollar at $1.9904, having recovered from an earlier session low of $1.9816.

On July 15, the euro jumped to a record peak of $1.6037. It was flat at $1.5902. Sagging global stock markets sent investors toward the safe-haven Japanese yen. The dollar fell as low as 104.17 yen, its third consecutive day of declines. It last traded at 104.76 yen, down 1.3 percent. Sterling hit a 3-1/2 month high against the dollar after UK consumer inflation rose to an annual 3.8 percent, dampening expectations of an early rate cut. It was up 0.6 percent at $2.0062, after earlier reaching $2.0153, its highest rate since mid-March.

On July 16, the dollar rose further from a record low against the euro, as a slide in oil prices and surprisingly strong earnings at Wells Fargo & Co soothed fears about the US economy and financial sector. The turmoil around Fannie and Freddie and fears about more credit losses at regional banks drove the dollar sharply lower a day ago, with the euro hitting a record high at $1.6037. The dollar also edged when

Federal Reserve Chairman reiterated to a House of Representatives panel that the risks to US growth have increased along with upside inflation risks, mirroring remarks he made a day earlier before the Senate.

Concerns about the US financial sector receded a bit after Wells Fargo, the fifth-largest US bank, raised its dividend despite a 23 percent decline in profit caused by bad loans. The euro was 0.6 percent weaker at $1.5817, well off a record high above $1.60 set a day ago. The dollar was up 0.3 percent at 105.01 yen and 0.9 percent at 1.0174 Swiss francs. Sterling retreated from recent 3-1/2 month highs against the dollar. It had fallen 0.3 percent against the dollar to trade at $1.9991, retreating from previous day’s 3-1/2 month high at $2.0153.

On July 17, the dollar surged against the yen and erased earlier losses versus the euro as oil prices plunged and investors worried that high energy costs and financial market turmoil were slowing global growth. The euro, which set a record above $1.60 on July 15, at one point fell below $1.58 for the first time this week as investors began focusing on the headwinds facing the euro zone economy. The dollar last traded at 106.45 yen, up 1.3 percent, its best daily performance since early April. It touched a session high of 107.09 earlier in the session.

The euro exited New York trade up about 0.1 percent at $1.5840 after falling to a session low of $1.5784. It had hit a record of $1.6037 earlier this week. But the dollar’s gains remained tentative, analysts said, particularly given the state of uncertainty surrounding US financial markets and the slumping housing market. The pound was up 0.25 percent on the day versus the dollar at $2.0037, edging back towards a 3-1/2 month high at $2.0153 set on July 15.

At the close of the week on July 18, dollar inched lower after posting its biggest daily gain against the yen in more than three months the day before when US stocks rallied on a sharp drop in oil prices. In Tokyo, the dollar was capped around 106.60/70 yen by exporter selling while support was seen around 105.80 yen. The euro was little changed, at $1.5867 off a session low of $1.5822 hit after European Central Bank President said in comments that euro zone growth is likely to be weak in the second and third quarter before staging a recovery. The pound was down 0.3 percent at $1.9956.