The central bank action against one moneychanger and warning to two others lent a support to the local currency this week and helped in narrowing the gap between the inter-bank market and kerb rates.
The rupee assumed an upward rising trend versus the dollar in the two markets. The gap had risen to 70 paisa in the previous week, which came down to 33 paisa in the week under review after the SBP action. In the inter-bank market, the rupee opened the week on a positive note and gained 2 paisa against the dollar on August 11, when the dollar traded at Rs57.77 and Rs57.79 versus the previous weekend close of Rs57.79 and Rs57.81.
Due to the absence of major demand for dollar on August 12, the rupee advanced further, amid moderate trading with the dollar changing hands at Rs57.76 and Rs57.78. Some dollar selling was noticed in the inter-bank market on August 13, helping the rupee gain another 2 paisa versus the dollar. At this point the dollar touched its lowest level in the week at Rs57.74 and Rs57.75. The trading remained suspended on August 14, being public holiday on account of Pakistan Independence Day. When trading resumed on August 15, slight increase in demand for dollar in the inter-bank market pushed rupee down by 3 paisa and the dollar revert to the week’s opening level of Rs57.77 and Rs57.78. Over the week, however, the rupee was weaker by 2 paisa for buying and 3 paisa for selling against the dollar.
In kerb trading, the parity assumed upward rising trend. Easy supply of dollar in the open market, helped the rupee to gain 8 paisa versus the dollar on August 11. The rupee extended further gains on August 12, and August 13 following the SBP action, which halted dollar’s artificial rise. In two days the rupee gained 30 paisa over the dollar. On August 13, the dollar was seen changing hands at Rs58.10 and Rs58.20. The market was closed for Pakistan’s Independence Day on August 14. The parity did not show any change on August 15, closing the week at Rs58.10 and Rs58.20.
Against the European single currency, the rupee moved both ways, amid fluctuations. On August 11, the rupee gained 15 paisa over the euro, which traded at Rs65.65 and Rs65.85. It, however, lost 25 paisa on August 12 with euro changing hands at Rs65.90 and Rs66.10. On August 13, the rupee recovered 60 paisa versus the euro, which was quoted at Rs65.30 and Rs65.65, the week’s highest level. On August 15, the rupee again shed 5 paisa and traded at Rs65.35 and Rs65.55 against euro. Over the week the rupee gained 50 paisa against the euro.
Against other major currencies, the rupee at the inter-bank counter showed strength against the British pound, the Swiss franc, the Swedish krona and the Danish and Norwegian krones, the Kuwaiti dinar, the Malaysian ringgit and the New Zealand dollar. It lost ground against the Canadian, Australian and Singapore dollars and remained unchanged versus the Japanese yen, the Hong Kong dollar, the Chinese yuan, the Saudi and Qatari riyals, the UAE dirham and the Korean won.
On the international front, the dollar turned lower against major currencies in thin volume on August 11, partly tracking a weaker US government bond market. Analysts also said investors were a little cautious a day before the Federal Reserve’s policy meeting. In New York, the euro was at $1.1362 against the dollar, up 0.50 per cent on the day. Against the yen, the euro rose 0.19 per cent to 134.78 yen. The dollar was weaker against the Swiss franc, trading at 1.3570 francs down 0.17 per cent on the day.
Commodity currencies: The Australian, Canadian and New Zealand dollar also showed strength against the US dollar on firmer metal prices. The Australian dollar was up 0.89 per cent at US$0.6587; the New Zealand dollar was at US$0.5884 from about US$0.5810 overnight. The Canadian dollar strengthened against the greenback, with the US dollar down 0.86 per cent at C$1.3797. The yen, meanwhile, continued higher against the dollar on the expectations that the Japanese investors will repatriate part of the $75 billion in coupon payments and redemptions of the US Treasuries this week. The dollar was at 118.44 yen down 0.56 per cent on the day.
Sterling pulled itself off early three-week lows against the dollar shadowing the euro’s revival from early weakness against the greenback while the British economic data had little market impact. The pound hit a low of $1.5985 early on, but recovered around half a cent off its lows as a weak showing on the US Treasury market later on saw the dollar drop back against the euro. Sterling was a shade down against the euro at 0.7057.
On August 12, the dollar was higher on the day against most major rivals in the run-up to the end of the Federal Reserve’s policy meeting, with traders practically on hold as they await the accompanying statements. The euro was at $1.1303 against the dollar, down 0.48 per cent from the previous New York close.
Traders said the euro is firmly entrenched in the $1.1250-$1.1450 range and is expected to remain so far the next couple of days as analysts expect more favourable US economic data later this week. The euro also fell to 133.87 yen a loss of 0.58 per cent on the day.
Some analysts say the euro could stage a marginal rally up to $1.1350 after the Fed meeting. The dollar, meanwhile, traded virtually flat against the yen as investors took note of signs that Japan, the world’s second largest economy, is on a recovery track. The greenback was at 118.40 yen down 0.11 per cent on the day.
The pound pinned its fortunes to the euro once again following the single currency lower against the dollar in thin summer trade. A surprise upturn in the UK inflation had only a fleeting market impact. Position-squaring ahead of the US Federal Reserve’s interest rate decision later on helped the dollar gain over half a per cent against the euro, setting the tone for sterling trade. The pound was down around a quarter per cent against the greenback at $1.6025, but firmer against the euro at 70.41 pence.
On August 13, the dollar pushed higher extending gains made after the Federal Reserve raised hopes of a US economic recovery by signalling it would keep interest rates low for some time to come. The dollar stood at around 119.00 yen up about a quarter yen on the day. The dollar continued to be supported by wariness about Japanese intervention, which would grow if the dollar dropped below 118. yen.
The greenback also received indirect support as the euro advanced against the yen on bargain-hunting after a recent rout. The euro briefly rose half a yen on the day toward 134.40 yen before shedding most of the gains. The euro was down more than a quarter cent against the dollar at around $1.1245/50. The dollar was trading at $1.1280 per euro, half a cent below earlier highs. It remained up nearly a quarter per cent on the day against the Swiss franc at 1.3700, off earlier highs of 1.3758. The dollar was also up a quarter per cent against the yen at 119, off this week’s highs of 119.22 set earlier. Sterling rose to its highest level against the euro in a week and pulled back from earlier three-week lows versus the dollar buoyed by upbeat UK jobs market data. It traded at 70.14 pence per euro, up a third of a per cent from the previous day’s close, and just off its highest level of the session at 70.10 pence.