IN the local currency market, the rupee this week resisted sharp decline while trading in narrow ranges. Downward pressure on the rupee, however, continued as bears remained dominated.

A latest forex report released by the State Bank of Pakistan reveals that Pakistan’s foreign exchange reserves are under pressure. These have fallen to $16.64 billion last week after hitting a record $18.31 billion in July last year, due to debt repayments.

The repayment of $399 million of the IMF loan is now due. That will further drain the foreign exchange reserves. At the same time, the prevailing poor governance and uncertain political situation has hurt confidence of foreign investors. The business of foreign companies has been incurring losses. This has resulted in increased foreign exchange outflows and mounting dollar demand.

Against the dollar, the rupee has depreciated by 5.4 in the eight months to February 24, 2012 and further by six per cent over the past 12 months. The dollar was at Rs85.45 and Rs85.60 in the open market and at Rs85.35 and Rs85.40 in the inter-bank market12 months ago, while eight months back it was trading at Rs85.90 and Rs.86.10 in the open market and at Rs85.95 and Rs85.98 in the inter-bank market. On the inter-bank market this week, the rupee continued its downtrend versus the greenback.

The week commenced on a negative note with the dollar climbing at Rs90.86 and Rs90.88 after the rupee lost nine paisa in the first trading session.

The rupee further lost four paisa at Rs90.90 and Rs90.92 in the second trading session. After depreciating by 13 paisa in the first two trading sessions, the rupee staged a modest recovery against the dollar in the third trading session and last traded at Rs90.80 and Rs90.85 after picking up 10 paisa on the buying counter and seven paisa on the selling counter. In the fourth trading session, the rupee inched down by 1 paisa on the buying counter but inched up by two paisa in relation to dollar and traded at Rs90.81 and Rs90.83. In the last trading session, the rupee shed three paisa before closing the week at Rs90.84 and Rs90.86.

In the open market, the rupee/dollar parity moved both ways, trading in narrow ranges. On the opening day of the week, the rupee shed 10 paisa versus dollar and traded at Rs90.90 and Rs91.10 after closing last week at Rs90.80 and Rs91.. It further lost five paisa in the second trading session and traded at Rs90.95 and Rs91.15. After shedding 15 paisa in the first two trading sessions, the rupee gave up its weakness in the third trading session when it gained five paisa and traded at Rs90.90 and Rs91.10. It retained its overnight level and traded unchanged against the dollar in the fourth trading session. The week, however, ended on a positive note as the rupee managed to gain 10 paisa and last traded at Rs90.80 and Rs91 against the dollar.

Versus the European single common currency, the rupee crossed Rs121 this week. It lost 63 paisa in the first trading session when it traded at Rs119.80 and Rs120.30 after closing previous week at Rs119.17 and Rs119.67. The rupee further extended its overnight weakness in the second trading session. It posted 20 paisa fall against euro which traded at Rs120.00 and Rs121. In the third trading session, however, the rupee managed to rebound against euro and was seen changing hands at Rs119.95 and Rs 120.45 after picking up five paisa on the buying counter and another 55 paisa on the selling counter.

The rupee overnight firmness versus euro proved short lived as in the fourth trading session it shed 65 paisa on the buying counter and Rs1.15 on the selling counter, pushing euro at Rs120.60 and Rs121.60 on February 23. In the last trading session, the rupee continued its downslide and shed 30 paisa before closing the week against euro at Rs 120.90 and Rs 121.90 on February 24, its highest level in the week. Against euro, the rupee has appreciated by 1.9 over the past 8 months but depreciated by 3.4 per cent over the past 12 months. Euro was at Rs123.69 and Rs124.19 on July 1, 2011 and at Rs117.24 and Rs117.74 on February 24, 2011.

On the international front, the euro rose in the Asian opening trading session, up 0.6 per cent against dollar at $1.3213, having risen as high as $1.3238, its highest in a week. The dollar rose to a six-month high against the yen at 79.89 yen, surpassing the October peak around 79.55 yen. But it quickly erased gains to stand at 79.57 yen. Sterling rose against the dollar in London, up 0.2 per cent against the dollar and last traded at $1.5862, having risen as high as $1.5880, its strongest in more than 10 days.

At the close of the week on February 24, the euro hit a session high of $1.3385 and was last trading around $1.3372. On the other hand, the dollar hit a fresh 7-1/2-month high against the yen at 80.66 yen, its highest since July 11 and last traded at 80.62 yen, up 0.9 per cent on the day. It has rallied five per cent against the yen in February. Sterling made robust gains against the dollar in London where it was last up 0.8 per cent at $1.5866.