AS UNCERTAINTY over the dollar’s future direction continues, the rupee in local currency market is gaining strength. Last week, the rupee-dollar parity maintained its stable trend in the interbank market, moving both ways in a narrow range.
After opening the week at Rs59.19 and Rs59.21 on September 23, almost unchanged over the previous weekend close, the rupee gained 3 paisa during the week closing at Rs59.16 and Rs59.17 on September 27. There was no major trading activity. The demand for currencies was in small volumes and the dollar’s demand and supply was in balance.
In kerb trading, the dollar has remained under pressure since September 11 last year. At present the dollar in the kerb is cheaper than in the interbank market and investors seemed to have lost interest in dollars. Since the interbank market is offering better rate for dollar most expatriates are channelling remittances through banking system, while big investors are investing in euro. During the week, the rupee gained 5 paisa over the dollar in the kerb. It opened the week on September 23, at Rs59.13 and Rs59.18 in kerb trading and closed at Rs59.08 and Rs59.14 on September 27.
The euro fluctuated against the rupee. It opened the week on a strong note gaining 20 paisa to trade at Rs58.15 and Rs58.45 against the rupee on September 11 but than suffered losses amid wide fluctuations. The week closed at Rs57.70 and Rs58.0 on September 27, reflecting 45 paisa gain in rupee value.
Against other major currencies at the inter-bank forex counter, the Pakistani rupee continued to weakened versus the British pound and the Norwegian krone. It lost ground last week versus the Japanese yen but extended previous week gains versus the Australian, New Zealand, Singapore and Hong Kong dollars, the Malaysian ringgit, the Saudi and Qatari riyals and the UAE dirham. It also gained over the Canadian dollar, the Swedish krona, the Dansih krone, the Kuwaiti dinar and was unchanged versus the Chinese yuan.
In the international financial market, the yen tumbled to three-year lows against the euro and three-month lows against the dollar on September 23, extending last week’s steep losses amid deepening pessimism about the world’s second largest economy. The euro, meanwhile, was little changed against the dollar as the investors were more worried about the rising Middle East tensions.
In the mid-morning US trade, the Japanese currency tumbled across the board as investors continued dumping the yen, after pessimism about the Japan’s economy deepened in the wake of last week’s dismal Japanese government bond auction and muddled economic policy signals.
Overnight, the yen had come close to last weekend lows, but had found some respite from a holiday in Japan that kept trading thin. But in the US trading, the euro punched up above 122 yen, setting new three-year highs well above weekend high around 121.40 yen. The dollar shot up above 124 yen, up 0.50 per cent from the previous US close and well above three-month peaks around 123.70 yen.
The euro was around 98.35 cents, virtually unchanged from the previous US close and off overnight peaks at 98.60 cents that were within the sight of two-week peaks. Overnight, the euro dipped only briefly below 98 cents after the news Schroeder’s Social Democrat Green coalition won the German election.
The sterling held near recent 5-1/2 month highs against the Japanese currency helped by the holiday-thinned trade in Tokyo, and was stuck in tight ranges against the euro and the dollar. Sterling peaked above 192.00 yen, its highest level since April 1 and within a whisker of levels not seen since 1999. Against the dollar, sterling held fairly steady at $1.5537 and was little changed against the euro at 63.16 pence.
On September 24, the dollar fell broadly weakened by more stock carnage of the Wall Street and anxiety about the potential war in Iraq, but largely shrugged off the Federal Reserve’s widely expected decision to leave the interest rates at four-decade lows. The Fed’s decision, combined with the European policy makers move to extend the deadline for euro zone members to get their budgets under control took pressure off the European Central bank to cut rates.
In the late New York trade, the dollar steadied near 98.22 cents against the euro, a loss of 0.45 per cent compared with previous day’s New York close. The dollar edged up from a session low 122.96 yen to trade at 123.23 yen, still a loss of 0.49 per cent on the day, but little changed by the Fed’s decision. Dealers booked profits after the yen’s steep fall to three-year lows against the euro and three-month lows against the dollar on September 23.
Sterling bounded nearly half a per cent higher against the dollar and outperformed the euro as a mixed session on the Wall Street weighed on the greenback. However, the pound retreated from recent three-year peaks against the yen as the Japanese currency finally found some respite from its recent pummelling at the hands of the majors. Sterling was up 0.4 per cent against the dollar at $1.5565, just below the day’s highs, and was firmer against the euro at 62.93 pence.
The dollar retreated against the yen in Asian trade on September 25 despite the yen’s gloomy outlook, with traders worrying about falls in the US stocks. It fell to a low of 122.38 yen down more than a yen from the day’s high of 123.42 yen. Dealers cited no decisive factor or news behind the move, saying the fall was due to the ongoing position adjustment after the dollar’s quick rise above 124 yen on September 23.
The dollar stood at 122.52/53 yen compared with 123.23 yen in the late New York, and many dealers did not rule out the possibility of the dollar falling below 121 yen in the near term. The effects washed over into euro/yen trade, with the single European currency down at 120.32/43 yen from 121.04 overnight. Against the dollar, the euro was little changed at $0.9816/26 from $0.9822.
Sterling struggled to maintain early gains against the dollar falling from 12-day highs due to a stock-inspired rally in the US currency. The US shares rose sharply at the opening snapping back after blue-chip stocks hit a four-year low in the previous session. The US stock market’s recovery gave the dollar a lift, but analysts said prospects for the pound remained strong. Sterling was trading at $1.5611/13 down from highs of $1.5670 and little changed from the US close.
On September 26, the yen reversed an early rise in Tokyo as most of the traders stayed cautious over the expectations for long-overdue banking reforms in Japan. By late Tokyo trade, the dollar had advanced to 122.95 yen from 122.84 in late New York, bouncing off a session low of 122.37 yen. The euro traded 97.84/87 cents, slightly up from 97.62 cents. Sterling edged away from the previous day’s 2-1/2 week peak against the dollar after unexpectedly strong US data buoyed the greenback across the board.
Sterling had risen to 107.1 on the trade-weighted basis, a gain of 2.6 per cent since mid August. It stood at $1.5561 per dollar, unchanged on the day but close to the previous day’s high of $1.5670. Against the euro it ticked higher to 62.60 pence from 62.68. The dollar jumped against major currencies in the early US trade the existing home sales data exceeded market expectations, rising at 1.9 per cent in August.
At the close of the week, the dollar nudged higher in Asia trading on September 27, held back by support for the yen on renewed hopes for bold banking reform in Japan. Finance Minister reiterated that an injection of public funds into banks was possible if needed.
Lifted by the position-adjusting ahead of the weekend, the dollar mustered to 122.32/42 yen from 122.02 in New York, but lacked energy for a stretch to an offshore high of 123.01. The euro followed the dollar’s move, marking hesitant gains to 119.58/67 yen from an overnight low of 119.05. Against the dollar, the single currency was steady at $0.9772/82 from $0.9764.
Sterling inched lower against the dollar and the euro but overall it ended the week higher with sentiment brightened by more evidence the UK economy is performing relatively well. Sterling stood at $1.5553, a tad weaker from the late New York levels but higher than the last week’s level.