However, the pressure of dollar-buying to cover quarter-end payments of the fiscal year seems to have eased due to handsome inflows of remittances from the overseas Pakistanis and support from the central bank, which has been providing the American currency from its own reserves. In the inter-bank market, the rupee recorded three paisa decline versus the dollar on September 11, which was changing hands at Rs60.45 and Rs60.47 as against last week close of Rs60.42 and Rs60.44.
On September 12, steadier trend was seen as the rupee-dollar parity rates stayed unchanged at its overnight level of Rs60.45 and Rs60.47, amid higher corporate demand for the US currency to meet the big payments of oil and other bills. Softer trend was seen on September 13, as the rupee shed two paisa for buying and one paisa for selling to trade at Rs60.47 at Rs60.48.
On September 14, range-bound trading was seen in the inter-bank market, as the rupee slid one paisa on the buying counter and two paisa on selling counter versus the dollar, changing hands at Rs60.48 and Rs60.50. On September 15, dollar buying by banks to clear the import bills continued to exert pressure on the rupee, which slipped further versus the dollar, shedding three paisa to trade at Rs60.51 and Rs60.53. During the week in review, the rupee in the inter bank market lost nine paisa against the dollar.
In the open market mixed sentiments were witnessed on the opening day of the week as the rupee drifted lower in relation to the dollar, losing three paisa on September 11, when the dollar was quoted at Rs60.50 and Rs60.55 against previous week close of Rs60.47 and Rs60.52. But on the following day, the rupee managed to display slight strength over the dollar, as it recovered two paisa and traded at Rs60.48 and Rs60.53 versus the dollar on September 12. However the rupee firmness over the dollar was short lived, as the rupee lost ground to dollar, shedding two paisa in terms of the dollar to trade at Rs60.50 and Rs60.55 on September 13.
Falling trend persisted in the open market where the rupee fell by five paisa against the dollar and traded at Rs60.55 and Rs60.60 on September 14. Aggressive dollars’ buying by the banks forced the rupee to extend further losses. On September 15, the rupee shed another three paisa versus the dollar in the open market trading at Rs60.58 and Rs60.63 due to high dollar demand to meet the payment requirements. The rupee in the open market lost eleven paisa versus the dollar, amid fluctuations this week
Versus the European single common currency, the rupee could not manage to hold its previous week firmness in the open market and shed 13 paisa on September 11 to trade at Rs76.54 and Rs76.64 against last week’s level of Rs76.67 and Rs66.77. The rupee further extended its slide versus the euro, losing 24 paisa more to trade at Rs76.78 and Rs76.88 on September 12.
On September 13, the rupee recovered 23 paisa versus the euro and traded at Rs76.56 and Rs76.66. But on the following day it shed 10 paisa versus the euro, which was seen trading at Rs76.66 and Rs76.76 on September 14. Finally on September 15, the rupee shed 15 paisa more against the euro, which was quoted at Rs76.91 and Rs77.01 as the dollar failed to sustain its firmness versus the major currencies of the world. In the entire week, the rupee lost 24 paisa versus the European single common currency.
In the world financial market, a track of Reuters daily reports reveal that the yen hit two-month lows against the dollar on September 11, and fell sharply versus the euro as investor sentiment soured on a perception that Japanese interest rates are unlikely to rise this year. A steep decline in Japanese factory orders hit the yen overnight. Traders said selling picked up after European Central Bank board member Juergen Stark hinted at an October interest rate hike in interviews with French and German media.
Stark’s comments also pushed the dollar lower against the euro, while a slide in commodities weighed on currencies that typically track resource prices, including the Canadian and Australian dollars and the Mexican peso. In New York, much of this action had played out, leaving the euro up 0.7 per cent at 149.35 yen. The dollar was up 0.5 per cent at 117.58 yen, near the 117.88 hit on July 19. Traders said the bets are leaning heavily against the yen, largely because the market expects the Bank of Japan to keep interest rates steady at 0.25 per cent for the rest of the year, having pretty much dashed expectations for another quarter-point rise.
In April, leaders of the G7 industrialised nations urged countries with large surpluses to embrace more flexible exchange rates, and in the following weeks the dollar tumbled to around 109 yen, from 116.50 yen. On September 11, the IMF reiterated the need for China to move to a more flexible exchange rate. But this had little impact on the yen, which often trades as a proxy for the tightly controlled Chinese currency.
The ECB, meanwhile, is widely expected to raise rates in October, and Stark reinforced this view when he told Germany’s Handelsblatt newspaper that he expects euro-zone inflation to remain above the bank’s target this year and next and that he does not view higher rates as a risk to the economy.
The euro was up 0.2 per cent at $1.2701, off its session peak of $1.2741 but above six-week trough of $1.2651 on September 9.Traders said the dollar also faces a dwindling interest rate advantage vis-a-vis the euro that should weigh on it in the sessions ahead.
The recent slide in commodity prices has also alleviated some concerns about inflation and reinforced a view that the Fed will be able to leave rates unchanged this year, having paused last month following two years of credit tightening. All this weighed heavily on the commodities currencies, leaving the Australian dollar down nearly 0.4 per cent at $0.7509, the US dollar up about 0.1 per cent against the Canadian dollar at C$1.1214.
On September 12, the dollar hit a five-month high against the yen and edged up against the, as interest rate differentials continued to favour the dollar, despite a widening in the US trade deficit to a new record in July. Then yen has fallen in the past few days as the perception has grown that the Bank of Japan will leave interest rates on hold this year and recent weak Japanese economic data has supported that view. The dollar has seen some support in the past week, as investors have scaled back their bets that the Federal Reserve will leave rates unchanged for the rest of the year, meaning interest rate differentials between the US and Europe and Japan will not likely narrow.
The dollar reached a session high of 118.15 yen but ran into options-related buying of yen and selling of dollars and by late afternoon had retreated to 117.95 yen to show a 0.3 per cent gain on the day. The euro meanwhile was under pressure, despite European Central Bank officials signalling their concern about euro zone inflation and the possibility of higher euro interest rates.
Given the widening US trade deficit, investors have been positioned against the dollar for some time, but have not fully reaped the benefits, as both the euro and the yen have yet to post and hold solid gains against the US currency. The dollar also hit a session peak against the Swiss franc at 1.2519 Swiss francs after a Swiss central bank official earlier told local media the economy is expected to slow next year. Sterling rallied half a per cent against the euro and the dollar, bouncing from recent lows after above-forecast UK inflation data bolstered the likelihood of a Bank of England interest rate rise in November. Sterling was up around half a per cent at $1.8740, recovering from six-week lows of $1.8599 hit after the PPI data on September 11.
On September 13, the yen broke a three-day losing streak against the dollar, helped by comments from the Bank of Japan, but the dollar was little changed ahead of the G7 finance ministers meeting this weekend. The yen fell to five month lows earlier this week on worries Japan’s economic recovery is faltering, but the minutes of the Bank of Japan’s last meeting, released early on Wednesday, showed the board believed the economy was expanding steadily. With Japan’s short-term interest rates at just 0.25 per cent, it will be some time before the yen can narrow significantly its yield gap with most other major currencies.
On September 14, the dollar fell against the euro for the second day in a row as the European Central Bank chief warned on inflation, but trading was muted ahead of this weekend’s international meetings. The euro was confined to a narrow range as traders maintained their current positions ahead of the weekend key US inflation data and, more importantly, this weekend’s meeting of finance ministers and central bankers from the Group of Seven nations. One currency strategist cited two reasons for reluctance to take big positions ahead of the G7 gathering.
In New York, the euro was up 0.2 per cent at $1.2727, having failed to break $1.2750 earlier, a level that has served as key euro resistance in recent sessions. The euro has traded in a tight $1.2750-$1.2665 band against the dollar over the last several trading sessions and has been trapped in a broader range of $1.2980-$1.2450 since April. It was still close to one-week highs. Against the yen, the dollar was down almost 0.1 per cent at 117.50 yen and the euro was up 0.2 per cent at 149.53 yen. Sterling gained 0.5 per cent to reach $1.8863, boosted by strong British retail sales and housing data. The euro was off 0.2 per cent at 0.6746 pence in late US trade.
Finally at the close of the week on September 15, the dollar pulled away from five-month highs against the yen in Tokyo, as investors squared positions before key US inflation data and a weekend meeting of Group of Seven finance ministers Traders said the yen may get a slight boost as more market players cut back on hefty bets against the Japanese currency before the G7 meeting for fear of any comments on weak Asian currencies that could spark a rally. But barring any surprises, the yen is seen likely to resume its slide after G7 as investors continue to dump low-yielding currencies for higher-yielding ones in the carry trade.