Dullness prevailed in the inter-bank market this week as there was no major demand for dollar from the corporate sector. Dollar inflow continued but the buying interest was absent from the market. The rupee dollar parity remained intact.
During the week rupee gained 10 paisa against the dollar. It opened the week on October 14 with dollar trading at Rs59.11 and Rs59.12, unchanged over the previous weekend close. It gained two paisa on October 15, one paisa on October 16 and 4 paisa on October 17 amid dull activity. Another 3 paisa gain was recorded against the dollar on October 18, when the rupee traded at Rs59.01 and Rs59.03.
In kerb, the rupee fluctuated in a narrow range. It shed 5 paisa on October 15 on slight increase in demand to trade at Rs59.0 and Rs59.10 against the dollar but recovered 5 paisa on October 16, reverting to opening week’s level of Rs58.95 and Rs59.05. Due to the lack of interest in currency trading and falling value of dollar, investors are not investing in dollar. Since October 16, the parity has remained unchanged at Rs58.95 and Rs59.05. Rupee has also maintained an upward trend over euro this week. After opening the week unchanged at Rs58.20 and Rs58.50 on October 14, the rupee has gained 90 paisa versus the euro in the following four days. At close euro was trading at Rs57.30 and Rs57.60, on October 18.
Against other major currencies at the inter-bank forex counter, the rupee continued its upward trend over the British pound and the Japanese yen extending gains over the previous week. This week it made fresh gains versus the Swiss franc, the Danish and Norwegian krones, the Swedish krona and the Kuwaiti dinar. At the same time it continued to weaken against the Candian, Australian, Singapore and New Zealand dollars, the Malaysian ringgit, the Saudi and Qatari riyals and the UAE dirham. It remained unchanged against the Chinese yuan. Leading currency traders are of view that the current trend is likely to prevail in the absence of any new development.
Meanwhile, the State Bank of Pakistan (SBP) has decided to reduce the margin between buying and selling rates for ready and forward transactions of dollars. Earlier, the authorized dealers were allowed to determine their own rates to exchange, both for ready and forward transactions “subject to the condition that the margin between the buying and selling rates should not exceed 50 paisa per US dollar or its equivalent in other currencies.
The central bank has now decided to bring down this margin between the buying and selling rates to 20 paisa per US dollar to match with the existing inter-bank market conditions. This condition does not apply to inter-bank transactions.
In the international financial market, the dollar was little changed in holiday-thinned trade on October 14 after a deadly bomb attack in Indonesia added to global security fears but failed to offer the market direction. While the fears pulled the regional Asian currencies - in particular the Singapore dollar and the Indonesian rupiah - to five-month lows against the US currency, the worst attack since last year’s September 11 attacks on the United States had a much more limited impact on major currencies. The euro was barely changed on the dollar at 98.71 cents. The dollar was off marginally against the Swiss franc at 1.4809 francs, indicating there was little safe-haven buying of francs after the Bali attack.
The yen, weighed down by concerns about the mountain of non-performing banking loans that are stifling growth in Japan, edged to a 3-year low against the euro. The euro traded up to 122.69 yen in late European trading. It drifted later but then retested those highs in late New York dealings. The dollar edged up 0.22 per cent versus the yen to 124.29 yen.
Sterling was trapped in narrow ranges against the dollar and the euro unfazed by figures highlighting plight of the British manufacturers, ahead of the key UK economic. Trading was thinned by holidays in Japan and Hong Kong with some US markets closed for Columbus Day. As a result, sterling spent the entire day stuck in a tight $1.5603-$1.5631 range. The pound stood at $1.5604, little changed from late New York levels on October 11. Against the euro it was stuck at 63.25 pence.
On October 15, a strong rally on the Wall Street and solid US corporate earnings gave the dollar a broad-based boost to 4-month highs against the yen and 1-week highs versus the euro. But the Japanese currency pulled off 3-year lows against the euro after healthy gains for the Tokyo stocks and news that bankruptcies in Japan fell in September.
The euro gyrated at session lows below 98 cents, down 0.75 per cent from the previous US close but off the days lows. Sterling trimmed its losses to stand just above new 3-week lows at $1.5486 to trade around $1.5515, down 0.45 per cent on the day. Against the yen, the dollar slid back near 124.55 yen, up 0.20 per cent on the day, as currency markets remained cautious about reading too much into the US stock market rally amid broader concerns about the pace of the US economic recovery from recession and global security fears.
The euro has been stuck in a broad range between 96.50 and 99.50 cents for weeks. The yen fell beyond 123 per euro in Asia for the first time in over three years after the Bank of Japan issued a sobering monthly report on the world’s second largest economy. But the Japanese currency recovered its footing, after the research firm Teikoku Databank said bankruptcies in Japan declined in September for a second straight month. In midday New York trading, the euro was back near the day’s lows just above 122 yen, nearly a full yen off its peak.
The dollar had a modestly weaker tone on October 16 as the US stocks pulled back after several days of gains, but dealers were loath to sell the dollar too hard due to a lack of other buying options. It was off 0.15 per cent against the yen in late New York trade at 124.44 yen after briefly topping the psychologically important 125-level earlier. Against the European currencies, its losses were even more minute, and it was nearly unchanged against the euro at 98.11 cents and the Swiss franc at 1.4943 francs as the trading day waned.
Most of the market has been biased against the yen because of Japan’s wobbly economy, persistent bad loan problem and mixed record on reform. That has led to a hefty rally for the dollar against the yen, a rally that has pushed the greenback 8 yen higher in 6 weeks to just above 125 yen, a four-month highs.
Sterling was steady as $1.5480 in late European trade, up almost half a cent from one-month lows set earlier in the session. Against the euro, the British currency fell a quarter-per cent at 62.75 pence, pulling back from highs scaled in Asia. A move beyond 62.37 pence would take sterling to its highest level against the euro in five months but strong technical resistance has allowed the euro to bounce repeatedly off this level.