THE rupee once again managed to hold ground versus the dollar in the inter-bank market after remaining weak in the previous week.
Initially the parity came under pressure on the opening day of the week under review, when the rupee traded against the dollar at Rs61.15 and Rs61.20, but soon it recovered its lost strength and started picking up after reported inflow of remittances from overseas Pakistanis, and heavy dollar selling by the exporters.
The rupee inched up on November 20 and traded at Rs61.12 and Rs61.17, after marginal gain of 2 paisa over the dollar. Increase in the flow of remittances from Pakistanis abroad further released the pressure on the rupee on November 21. It recorded a sharp gain of 19 paisa to trade at Rs60.93 and Rs60.98 against the dollar. The entry of exporters in the market to sell dollars further boosted the rupee on November 22, and helped it gain another 13 paisa to trade at Rs60.80 and Rs60.85. On November 23, however, it lost 5 paisa amid thin business. It traded at Rs60.85 and Rs60.90 against the dollar, reflecting an appreciation of 30 paisa, over the previous weekend close.
Against other major currencies, the rupee at the inter-bank forex counter displayed strength. During the week it appreciated versus the British pound, euro, German mark, Japanese yen, Canadian, Australian, New Zealand, Hong Kong and Singapore dollars, Swiss, French and Belgian francs, Dutch guilder, Danish and Norwegian krones, Swedish krona, Italian lira, Austrian schilling, Spanish peseta, Chinese yuan, Malaysian ringgit, Kuwaiiti dinar, Saudi and Qatari riyals and the UAE dirham.
In the open market, the rupee came under heavy demand pressure. The market resumed trading on November 19, with the local currency trading at Rs61.50/61.70. The pressure on the rupee extended further on November 20, forcing the rupee to shed 30 paisa on increasing demand for dollar, which traded at Rs61.80 and Rs62. However sufficient supply of dollars reversed the trend and the rupee started to gain over the US currency in the second half of the week. Thus after gaining almost 70 paisa over the dollar which traded at Rs61.60 and Rs61.90 on November 21, the rupee extended more gains on improved dollar supply and the rupee further strengthen. It traded Rs61.40 and Rs61.70 against the dollar on November 22, recording a 20 paisa gain. Sufficient supply of dollar helped the rupee to gain another 20 paisa against the dollar which traded at Rs61.40 and Rs61.50 on November 23. There was lack of demand for dollar in the market with most investors in sidelines. Over the previous weekend however, the rupee on November 23, showed no change.
Further increase in inflow of remittances from Pakistanis abroad in coming days will exert downward pressure on the dollar, strengthening Pakistani rupee. The dollar is likely to come under further downward pressure in coming days allowing the rupee to maintain its firmness, according to most currency dealers.
In the international financial market, the dollar rose to three-month peaks against the euro, yen and sterling in New York on November 19, before timing some gains late in the session. The yen was pressured as the Bank of Japan downgraded its economic assessment for a sixth month in a row. The euro was held back as the Bundesbank said the German economy stagnated for a second straight quarter from July to September.
The dollar pushed as high as 87.67 cents per euro, its highest since August 8, before cut some losses to around 87.84 cents in late trade. The pound tumbled nearly 1 per cent to a low of $1.4088 before clawing back to around $1.4129 and the yen struggled back to near 123.07 yen per dollar in the US trade after falling to a three-month low near 123.50. In the past week, the dollar has racked up gains of about 2 percent against the euro and 3 percent against the Swiss franc and yen.
In London, the pound fell to its lowest levels against the dollar in more than three months as the greenback continued to gain on optimism the US economy will bounce back sooner than was previously expected. Sterling fell to lows around $1.4175 before recovering to around $1.4185, its poorest showing since August 14.
In Tokyo, the dollar hit a three-week high against the yen amid increasing worries about the Japanese banking sector. It rose as high as 123.14 yen. The dollar stood at 123.02/07 yen versus 122.90 yen in New York late on November 16.
On November 20, the dollar succumbed to a brief dizzy spell in Tokyo as the recent race to multi-month highs drew profit-taking from exhausted investors. In late trade the dollar had settled at 123.07 yen having dipped as low as 122.97 from previous day’s three-month highs of 123.52. In London, the euro steadied for a moment around $0.8793 having slid to three-month lows of $0.8767. Sterling pulled itself off recent three-month lows against the dollar and trimmed losses to $1.4195 having tumbled to three-month lows of $1.4088 in the previous session. Against the euro, the pound stood at 62.24 pence, little changed from New York close.
On November 21, the dollar regained strength in late Tokyo trade after the yen met fresh selling pressure on growing expectations of a downgrade of Japanese government debt. The yen started losing ground in the afternoon after a news agency quoted a senior official at the US credit ratings firm Standard & Poor’s as saying the chance of a downgrade was growing. Sterling nudged up against the euro in London after the single currency was dented across the board by a weak key German business sentiment survey. It rose nearly half a per cent against the euro to 61.90 pence from 62.16 in late New York levels. It edged down against the dollar to $1.4172 from $1.4192, but kept a safe distance from three-month lows of $1.4088 hit earlier this week.
In New York, the dollar climbed to a new three-month high against the euro on after a slightly better than expected US consumer sentiment survey combined with an earlier gloomy reading of Germany’s business climate. The euro fell as far as 87.55 cents a loss of 0.82 per cent, its weakest level since August 8.
On November 22, the dollar held its firm tone in Tokyo as a wave of yen-negative factors loomed ahead of a long weekend in the United States and Japan. The dollar crept to a high of 123.31 yen from an offshore low of around 122.59 yen, although it fell short of breaking a recent high of 123.52 yen hit on November 9. In London, sterling shed over a third of a per cent against the euro and the dollar undermined after a Confederation of British Industry survey indicated a sharp fall in exports. The pound was pinned at the day’s lows around 62.25 pence per euro, with sight of three-week troughs around 62.40 pence on November 20. It hovered just about $1.41, more than a third of a per cent lower on the day and compared with four-month lows set earlier this week around $1.4080. The pound has shed nearly four per cent against its US counterpart since the start of this month.
On November 23, Tokyo market was closed for a holiday while trading in New York remained sluggish on account of two days holiday. In London, sterling slid to four-week lows against the euro and four-month lows against the dollar before climbing all the way back up buffeted by a pro-Europe speech by Britain’s prime minister. It fell by as much as half a per cent from the New York close in advance of the speech to $1.4042, its worst showing against the broadly strong dollar since July 18.
It also weakened to 62.56 pence per euro, its worst performance since October 26. It recovered those losses after Blair’s speech, to trade at $1.4126/31 and 62.22/62.27 pence per euro. Sterling fell to a 15-year low against the dollar just after the British election in June, on feverish market speculation on the EMU entry.