Trading activity remained subdued in the inter-bank market as well as in kerb, amid uncertainty over the political front.

The rupee continued to display strength over the dollar. Prevailing weakness of dollar in the international market together with increased dollar inflows from Pakistani expatriates and exporters proceeds has created sufficient stock of dollars. The absence of importers demand and lack of interest from investor on the other hand, has restricted dollar demand.

In the inter-bank market the rupee extended its firmness over the dollar, trading in narrow range. In four days trading the rupee gained 12 paisa versus the dollar to close at Rs58.71 and Rs58.74 on November 6, against Rs58.83 and Rs58.86 at the beginning of the week on November 4. The inter-bank market was closed for trading on November 7, on account of Bank Holiday on first Ramazan.

The parity in the kerb followed a similar trend. Demand for dollar was low throughout the week. The rupee gained 30 paisa against the dollar trading at Rs58.30 and Rs58.60 on November 6 as against Rs58.90 and Rs59.0 on November 4. However, it lost 5 paisa against the dollar on November 7, on slight increase in demand for dollar in the kerb in the absence of inter-bank trading due to Bank Holiday. The rupee traded at Rs58.65 and Rs58.75 against the dollar down 15 paisa during the week. Euro showed wide fluctuation. It opened the week on November 4, on a positive note, shedding 10 paisa versus the rupee to trade at Rs58.50 and Rs58.90 against Rs58.60 and Rs58.80 in the previous week. However, the rupee failing to maintain its upward trend on November 5, lost 32 paisa against the euro to trade at Rs58.82 and Rs59.12, on rising demand. But the rupee managed to recover its lost ground on November 6, gaining 52 paisa over the euro, which traded at Rs58.30 and Rs58.60. Euro again gained ground over the rupee which shed 45 paisa on November 7. It crossed Rs59 barrier for the second time during the week trading at Rs58.75 and Rs59.05 against the rupee. However net impact of these fluctuations during the week was a gain of only 15 paisa in the rupee value of euro.

Against other major currencies, the rupee at the inter-bank forex counter remained weak against British pound, euro, Swiss franc, Australian dollar, Danish and Norwegian krones, Swedish krona and Japanese yen. It, however, gained fresh ground over Canadian, New Zealand and Singapore dollars and also firmed up against Hong Kong dollar, Chinese yuan, Malaysian ringgit, Kuwaiti dinar, Qatari riayal and UAE dirham. The rupee was unchanged versus Saudi riyals.

Trading in currencies will remain suspended on November 9, being public holiday on account of Allama Iqbal Day. In the absence of moving factors, no major development is expected next week and the prevailing trend in rupee/dollar parity is likely to persist. However, few currency analysts express their fear that continued political uncertainty in coming days could exert pressure on the rupee.

On the international front, the dollar held steady on November 4 as traders retreated to the sidelines. The dollar was barely moved, rising just 0.6 per cent against the yen and falling by a similar margin against the euro. It closed at 122.20 yen and 99.76 cents per euro. Against the Swiss franc, the dollar was flat at 1.4656 francs. Sterling lost ground versus the euro and the dollar as traders took profits on the pound’s recent gains. It finished down 0.40 per cent on the dollar at $1.5573, while the euro gained a half per cent on the pound to 64.03

In London, the dollar recovered from the previous session’s three-month low against the euro and one-month low against the yen as traders positioned for an expected cut in US interest rates later in the week. The dollar had recovered roughly a third of a per cent on the day to stand at $0.9938 per euro and 122.55 yen by the European mid-session.

Sterling took a beating dropping to a two-month low versus the euro and shedding more than one US cent as players took profits on the pound’s recent gains against the dollar. But renewed profit-taking versus the dollar bumped it down through 64.00 pence per euro and took it to the day’s low of $1.5526 more than half a per cent below the levels on November 1. Sterling was trading at 64.00 pence after dipping as far as 64.09. It had already shed two per cent on last weekend as the single currency took advantage of poor US data to drive higher against the dollar.

On November 5, the euro made another play at parity with the dollar as euro zone economic data showed some improvement, but trade was half-hearted as dealers awaited Federal Reserve meeting. The euro rose as high as $1.0044, a three-month peak, before running out of steam in the US afternoon to trade at 99.78 cents, a gain of 0.15 per cent on the day.

The dollar fell 0.23 per cent versus the Swiss franc to 1.4623 francs. It also drifted against the Japanese yen, falling 0.34 per cent to 121.78 yen. Sterling was trading at $1.5630 down 0.36 per cent. The euro gave up 0.12 per cent against the pound to trade at 63.94 pence.

The pound fought back from a two-month low against an ebullient euro and held on to a half-cent gain on the dollar as the greenback slugged it out to maintain parity with the single currency. Sterling largely ignored a cryptic comment from the British government’s parliamentary business manager robin Cook that the euro would be included in Queen’s Speech setting out ministers’ legislative plans for the coming year.

Sterling was a third of a per cent up at $1.5628, having earlier attempted a test of last weekend’s three-week high of $1.5675. Sterling’s gain on the dollar was mainly due to the US unit’s belly flop across the board but upbeat British retail sales and service sector data underpinned the pound’s performance.

On November 6, the dollar regained some strength in Asia recovering from a five-week low against the yen, but struggled to extend gains ahead of the Federal Reserve’s monetary policy-setting meeting. Some traders said the dollar rose during the day on a growing perception that Republicans would score big victories in midterm US elections, but others said there were other factors to take into consideration.

The dollar was at 122.41/46 yen compared with 121.90/95 yen in New York. The euro was trading below parity with the dollar at $0.9968/71 after rising to a three-month high of $1.0044 in overnight trade. It was at $0.9996/01.

Sterling held below recent lofty peaks against the dollar and hugged a tight range against the euro as dealers waited for key central bank interest rate decisions. Sterling stood at $1.5585 in late European trade, down almost a cent from three-week highs scaled last week. However, volumes had slowed to a trickle ahead of the Federal Reserve’s rate decision. Sterling hugged a tight range around 63.90 pence per euro, having fought back from a two-month low against an ebullient single currency in the previous session.

The Fed cut the key fed funds rate by 50 basis points to 1.25 per cent, a new four-decade low in a bid to reignite an economy that had lost its already feeble spark. The dollar edged to fresh three-month lows of $1.0048 per euro a loss of about four tenths of a per cent on the day. It fell by a similar percentage against the Swiss franc to 1.4562 francs. Against the yen, the dollar was off 0.12 per cent at 121.72 yen.

The dollar retained a bearish tone in Asia on November 7, as a surprisingly aggressive rate cut by the Federal Reserve fuelled concerns that the US economy is in more serious condition than previously though. The euro rose to a three-month high against the dollar, supported by growing speculation that the European Central bank (ECB) may cut rates by at least 25 basis points in concerted action with the Fed to stem global deflationary pressure.