The rupee/dollar parity remained under pressure in the local currency market throughout the week. Rush for dollar-buying continued in the inter bank market.
Despite strong dollar-demand, exporters preferred to stay out of the market holding back their dollar proceeds in anticipation of further decline in the value of local currency.
Due to higher demand for dollar in the past two months to meet payment requirements and importers demand for forward contract, the rupee has lost about one per cent. As a result of continuous weakness in local currency value, the rupee lost nearly 70 paisas since July.
This week, trading in the inter bank commenced on a weak note with the rupee touching two and a half year lows at Rs58.53 and Rs58.55 against the dollar on August 2, down nine paisas over the previous week close.
On August 3, a beeline for dollars at banks pushed the official rupee-dollar parity rates to the 9/11 levels at Rs58.80 and Rs58.82 in the inter bank market. On August 4, the rupee nose-dived versus dollar breaching the Rs59 level as a result of continued dollar buying by corporate sector.
The central bank intervened and reportedly sold nearly 40-60 million dollars, when the rupee touched the low level at Rs59.30 in almost two years, amid hectic buying of dollars.
As buying pressure eased, the rupee managed to recover some of its losses and at the close of the trading session, the dollar was seen changing hands at Rs58.90 and Rs58.95, down 10 paisas from its overnight levels.
On August 5, the rupee managed to hold its overnight levels versus the dollar in the inter bank market following the State Bank's warning of strict action against speculative buying. It traded unchanged at its overnight levels.
The rupee shed about 50 paisas during the three days of the current week. The local currency lifted from its low level at Rs58.84 and Rs58.88 on August 6, in the inter bank market gaining seven paisas amid persistent demand for dollars.
The State Bank of Pakistan warning to rumour mongers in currency trade played a vital role in the marginal recovery of the rupee versus dollar. During the week, the rupee shed more than 40 paisas against the dollar.
In spite of falling trend in the inter bank market, the rupee recovered 10 paisas in kerb dealings and traded versus the dollar at Rs58.60 and Rs58.65 on the opening day of the week.
However, on August 3, in sympathy with the inter bank direction, the rupee drifted lower, shedding three paisas to change hands at Rs58.63 and Rs58.68. Panic-buying by banks pushed down the rates in the open market.
On August 4, the rupee, lost nearly 40 paisas in a single day and traded at Rs59.00 and Rs59.10 versus dollar. Thus, the rupee has lost nearly 90 paisas in relation to dollar in the kerb, since the new fiscal year started.
Despite the persistent demand for dollars, the rupee held its overnight levels for buying and selling at Rs59.00 and Rs59.10 on August 5, in the open market. But the local currency failed to maintain its overnight strength for more than a day and shed 10 paisas against dollar in the open market to trade at Rs59.10 and Rs59.15 on August 6, following persistent demand for the greenback. At this level, the rupee was also 40 paisas down versus the dollar compared to its previous week end level.
Versus the euro, the rupee continued to follow a declining trend throughout the week. It shed 10 paisas on the first day of the week, changing hands at Rs70.70 and Rs71.00, as the single European common currency continued gaining its value in the international markets, on August 2. On August 3, the rupee further lost 25 paisas changing hands at Rs70.45 and Rs70.75.
The rupee again shed 15 paisas against the euro to trade at Rs70.85 and Rs71.15 on slight rise in its demand in world markets on August 4. I t again lost nearly 30 paisas, trading at Rs71.15 and Rs71.45 on August 5.
However, it gained five paisas in relation to euro on August 6, changing hands at Rs71.10 and Rs71.40. Over the previous week, the decline in the rupee value against the Euro this week was to the tune of 45 paisas.
In the international financial market, the dollar weakened on August 2, due to market nervousness about fresh security concerns, but it trimmed some of those losses after a report showing a generally healthy US manufacturing sector.
Over the weekend, intelligence warnings of al Qaeda threats to attack the New York Stock Exchange, International Monetary Fund and World Bank prompted the United States to issue a high alert for financial institutions in New York and Washington.
That triggered a dollar sell-off in Asia and Europe but the US currency's losses were moderated after the Institute for Supply Management's manufacturing index rose to 62.0 in July from 61.1 in June, meeting market expectations.
The euro subsequently came under renewed selling pressure, particularly against the yen, which helped the dollar recoup some of its earlier losses. It was trading well off the day's high of $1.2093, according to Reuters data, at $1.2030, marginally stronger on the day.
The dollar was weaker at 110.70 yen, down around 0.7 per cent from last week and kept under pressure by the euro's slide against the yen. The euro zone's single currency was trading at its session lows around 133.18 yen, off almost half a per cent.
Against the Swiss franc, the dollar reduced losses to 1.2781 francs. Sterling rose more than one US cent after a survey showed UK manufacturing raced ahead in July at its fastest pace in a decade, but gains were trimmed after a similar report on the US factory sector.
The UK manufacturing PMI came in way higher than analysts' expectations which boosted sterling as far as $1.8333. It trimmed those gains to stand a third of a per cent higher on the day at $1.8264 but still was near the day's high 65.82 pence per euro.
On August 3, the dollar fell against most major currencies after a key US inflation gauge showed a tepid reading, reinforcing expectations the Federal Reserve is likely to raise interest rates gradually.
In late New York trade, the euro rose nearly 0.4 per cent against the dollar to $1.2065. The dollar fell versus the yen to 110.57 yen. Against the Swiss franc, the dollar dropped to 1.2767 francs. Sterling, however, weakened to $1.8235.
Sterling slid from six-week peaks against the euro on August 3, as signs of a slowdown in British consumer spending raised doubts over the pace of future interest rate rises.
It was down half a per cent at 66.16 per euro, having risen as high as 65.72 pence in Asian trade, its highest against the single currency since mid-June. The pound was also slightly lower against the dollar, at $1.8225.
On August 4, the dollar was virtually flat against the euro. Its overnight gains wiped out by a sell-off in New York sparked by heightened security tensions. A small blast near Athens, venue of the Olympic Games, and security-related rumours fuelled buying of euros and Swiss francs, a refuge in times of geopolitical worries.
In New York, the euro was trading at $1.2045, hardly changed from $1.2050 of the previous day. It had spiked up to session highs around $1.2067 after a minor blast just outside Athens.
Against the yen, the dollar held its gains at 111.14 yen. So far, the yen has suffered the brunt of soaring crude costs despite robust Japanese economic numbers. The yen suffered broad-based losses as record high oil prices dimmed the outlook for Japan's recovery and encouraged investors to pull out of Asian stock markets.
The Swiss franc traded higher across the board due to security-tension news. The dollar fell 0.2 per cent to 1.2764 francs, as did the euro to 1.5370 francs. Sterling was slightly weaker at $1.8240.
It steadied against the dollar and the euro, as markets anticipated a moderate quarter-point British interest rate rise. It was trading at $1.8221, down nearly 0.2 per cent from the US close, and steady against the euro at 66 pence.