No major development was noticed in the currency market. Rupee continued to display strength over dollar during the week. In the inter-bank market, the dollar moved in the narrow band and maintained its overnight level on August l9, trading at Rs59.55 and Rs59.57 versus the rupee.
No major demand was witnessed during the day. The rupee recorded a nominal fall of one paisa on August 20, following the dollar recovery in the international market. The rupee traded at Rs59.56 and Rs59.58. On August 21, the rupee gained 2 paisa over the dollar, amid new demand and traded at Rs59.54 and Rs59.55. However, slight improvement in the dollar demand pushed the rupee down, which lost one paisa over the overnight level to trade at Rs59.55 and Rs59.55. On August 22, the parity stood unchanged at its overnight level in quite trading. The rupee, however, shed 2 paisa on August 23, after a slight increase in the dollar demand. Small investors’ interest in fresh dollar-buying boosted its value to Rs59.57 and Rs59.58 against the rupee following reports of debt rescheduling by the US.
Against other major currencies on the inter-bank forex counter, the rupee displayed strength versus the British pound, the euro, the Swiss franc, the Australian, New Zealand and Singapore dollars, the Swedish krona, the Norwegian and Danish krones, the Japanese yen and the Kuwaiti dinar. It remained week against the Canadian dollar but was stable versus the Hong Kong dollar, the Chinese yuan, the Malaysian ringgit, the Saudi and Qatari riyals and the UAE dirham.
In kerb, the SBP decision to stop dollar-buying from the market and a steady supply of the US currency helped the rupee gain 5 paisa on the opening day of the week, when dollar traded at Rs59.40 and Rs59.50. But on the following day, the rupee after 5 paisa decline against the dollar, reverted to the previous weekend level of Rs59.45 and Rs59.55. There was a slight improvement in the demand for dollar on August 20, but sufficient supply of dollar due to dollar-selling by the exporters, and an increase in the flow of the overseas remittances limited the decline in rupee to 5 paisa. In the following two days, the rupee/dollar parity remained unchanged at Rs59.45 and Rs59.55. The rupee finally ended the week on August 23, shedding 5 paisa on increased dollar demand, to trade at Rs59.50 and Rs59.60, still 5 paisa lower then the inter-bank market parity.
Euro on the other hand continued to snide the rupee. It was trading at Rs57.50 and Rs57.80 at the end of the week. Experts are of the opinion that no major development is expected in the currency market where rupee/dollar parity is likely to remain stable amid modest fluctuations. There could be some increase in dollar demand due to fresh buying by small investors but the sufficient dollar supply will keep the parity within Rs59.55 and Rs59.60 range in the inter-bank market as well as in the kerb. Major investors will keep themselves away from the currency market for the time being.
Foreign exchange markets have been keeping a close eye on the developments in Iraq, fingered by the United States as a supporter of the terrorism and a target of possible military action aimed at ending Hussein’s reign.
The euro was given a boost after the German police ended a hostage-taking by an Iraqi opposition group at the Iraqi Embassy in Berlin with no deaths reported. Members of the obscure group, calling itself the Democratic Iraqi Opposition of Germany demanded an end to Saddam Hussein’s rule in Baghdad.
On August 19, the dollar rose broadly helped by the US stock price gains, a chastisement of the Japanese reform efforts by the credit rating agency Standard and Poor’s and the investor re-examination of global growth prospects. The dollar gained one per cent against the Swiss franc and nearly as much against the yen, the euro, and the sterling in very light summer holiday trade.
The euro fell by 0.87 per cent to 97.53 cents, a session low that also represented a major support point. It traded at 118.65 yen, up 0.93 per cent on the day, but off the session high 118.74 yen. Sterling fell to $1.5264, a loss of 0.79 per cent.
The British pound fell to its lowest against the dollar in almost a week tracking the euro lower with no domestic news to give independent direction. Sterling was mired at session’s low below $1.53 down more than half a per cent on the day.
On August 20, the dollar climbed to a one-week high against the yen in Asia bolstered by a rally on the Wall Street that breathed confidence into the US dollar assets but failed to spur buying in the Japanese shares. Sentiment for the US stocks, and for the dollar, has improved since the US firms vouched for their accounts by the August 14 deadline set by the Securities and Exchange Commission, helping to sooth the worries about accounting practices in corporate America. The dollar was also boosted by the increasing market attention to Japan’s fragile economic recovery.
The dollar rose to 119.27 yen, its highest level in a week, from the overnight US level of 118.55/60 yen. The dollar was quoted at 119.10/15 yen. Rounds of short-covering triggered stop-loss buying around 118.75 yen to lift the dollar. The euro was little changed against the dollar at 537.64/68 cents compared with 57.55/60 in the late US trade. Sterling held in tight ranges versus the dollar and the euro as the UK data failed to generate much interest, and emphasized the market’s focus on retail sales and growth data due later this week. It was around $1.5255 per dollar and 63.85 pence per euro, nearly unchanged on the day. The dollar slipped over half a yen on august 21 after a renewed fall on the Wall Street had investors worrying again about the outlook of the US economy. The greenback suffered constant speculating selling pressure, with foreign players eagerly unwinding long positions after seeing stiff resistance slightly above 119 yen.
The market is moving in a range of 116 to 121 yen and lacks direction. But there is a greater downward risk since the Dow is struggling to rise. The euro was quoted at 98.43/46 cents against 97.95 in late New York. The single currency was at 116.12 yen against 116.31, with sizable sell orders from the exporters and the profit-takers lined up around 116.40 yen. Sterling stood at $1.5233, half a cent lower from late New York levels. Against the euro it was steady at 64.05 pence.
The dollar fell to a morning low of 117.96 yen after stop-loss selling triggered around 118.50 intensified. Some traders said a front-page article in the Financial Times that the Saudi investors were withdrawing dollar assets also provided another reason to sell the greenback. The dollar was at 118.01 yen against the late US level of 118.69 yen.
Sterling drifted lower to a 1-1/2 month low against the dollar as the US stocks opened higher, easing recent doubts about the Wall Street’s out-performance and underpinning the geenback. Earlier sterling rose to a high of $1.5342 but it erased its gains as the dollar crop up with the higher US stocks. A survey showing a rise in supply of the UK homes eased price growth hardly gave any impact as investor focus remained firmly on the UK retail sales data.
On August 22, the dollar edged up towards the high end of recent ranges helped by a rise on the Wall Street, but the market was careful about chasing it aggressively due to a cloudy economic and political outlook in the US. Firm bids emerged to lift the dollar to a session high of 119.15 yen, a day after the Dow Jones Industrial average rose one per cent and the Nasdaq composite put on 2.37 per cent. But the dollar shied away from key resistance at 119.30 yen clue to concerns over the US economy, and the lingering wariness ahead of the one year anniversary of the September 11 attacks.
The dollar was quoted at 118.83/84 yen agonist a late US level of 118.43/51 yen. It was the second day this week that the dollar was blocked above 119 yen. Many traders said they expect the dollar to be locked in a range of 116-121 yen without new trading incentives. The euro was quoted at 97.81/86 cents against 97.97/98.02 cents in the late US trade. The single currency was at 116.25/33 yen against 116.20/29.
Sterling was down more than a third of a per cent at $1.5262 but little changed against the euro at 63.94 pence. There was a bit of disappointment it over -the retail sales numbers but not enough to push the sterling out of its recent range.
At the close of the week on August 24, the dollar briefly rose to a two-week high against the yen and the euro in Asia as the recovering US share prices restored confidence in the currency. It rose as far as 120.31 yen, its highest since August 9 and extending an advance from 119. 83/9l in late IJS trade and from around 119 just 24 hours ago.