THE local currency market opened the week on a negative note and then witnessed bearish trend in the absence of market players amid low trading volumes throughout the week.
Trading this week almost came to standstill for four days following disturbances in Karachi, which erupted after bomb blast at a religious meeting held to celebrate Eid Millad-un-Nabi on April 11. Over 50 persons, including prominent religious leaders, were killed in the bomb blast. On the opening day of the week, rates slipped in the inter-bank market as the rupee shed three paisa against the dollar for buying and another five paisa for selling to trade at Rs60.00 and Rs60.03 after closing last week at Rs59.97 and Rs59.98 on April 10. The dollars’ supply was tight due to international markets’ closure, while there was a rush of dollar buyers ahead of the Eid-e-Milad-un-Nabi.
The market was closed for public holiday on April 11. It was supposed to open on April 12, after a day break but as a result of the bomb blast, all trading activity remained suspended in the city on April 12. Easy supply of dollar helped the rupee to recover its losses on April 13, when the inter-bank market observed bullish trend as the rupee gained versus the dollar moderately, picking up four paisa for buying and another five paisa for selling, changing hands at Rs59.96 and Rs59.98.
In the open market, the rupee gained two paisa for buying and further three paisa for selling on April 10, with the dollar changing hands at Rs60.10 and Rs60.15 against the previous week close of Rs60.12 and Rs60.18. Trading in local market remained suspended on April 12, due to the disturbances in Karachi. But in Lahore and Islamabad, the rupee showed marginal improvement versus the dollar in the absence of buyers. The rupee lost two paisa to trade at Rs60.10 and Rs60.20 on April 12, against opening week’s closing rates of Rs60.12 and Rs60.22. The rupee further managed to recover five paisa on April 13, changing hands at Rs60.05 and Rs60.10, in Lahore.
The local currency market remained closed on April 14, due to the strike call to protest the killings. There was low level of trading in the absence of market players in the inter-bank market. In Lahore, the dollar-rupee parity remained unchanged amid sluggish trading trend in the local currency markets. According to the currency dealers, there was no change in dollar’s demand and supply condition which helped the local currency maintain its previous day’s closing levels of Rs60.10 and Rs60.20.
Against the European single common currency, the rupee stayed unchanged on April 10, trading at previous weekend’s Rs72.35 and Rs72.45. On April 13 it was quoted at Rs72.30 and Rs72.40, after recovering five paisa versus the euro. Trading in the local currency market remained suspended on April 14, in the absence of market players due to strike call from religious and political parties.
In the international market, the dollar slipped on April 10, but stayed well above a seven-month low against the euro, underpinned by a view that the Federal Reserve may have room to raise interest rates two more times. Solid March data for the US payrolls cemented expectations that the Fed will lift its funds rate for a 16th straight time to five per cent at its next meeting in May, pushing the dollar up around one per cent against the euro last week.
The dollar rallied 15 per cent last year against the euro and the yen on the back of a US tightening campaign that kicked off in mid-2004.
The euro was at $1.2120, up from around $1.2090 marked in late US trade but well below a seven-month peak of $1.2333 hit last week.
The euro fell sharply at the end of last week after European Central Bank chief said that the central bank did not share the same view as the market, which had girded for a clear signal that the ECB would increase interest rates in May.
Against the Japanese currency, the euro was little changed at 143.05 yen, well down from the 144.88 yen hit last week on electronic trading platform EBS - the highest since the euro was launched in January 1999.
The dollar was at 118.05 yen, down from around 118.30 yen marked in late US trade last week close. Sterling was steady within recent ranges against the dollar, at $1.7456.
In London, the dollar eased on profit-taking after last week’s late rally, but stayed above recent seven-month lows against the euro after US jobs data on April 7, supported the case for further US monetary tightening. The euro was up 0.11 per cent on the day at $1.2100. It hit a seven-month high last week at $1.2333 before falling sharply in the wake of ECB chief’s comments and the US jobs report.
Some analysts said that while the euro’s pullback last week sent bearish signals to the market there was still scope for further upside progress. The dollar hit a one-week high against the yen at 118.48 and the euro was steady at 143.24 yen but down from a record high of 144.92 hit last week. The yen fell after Japanese Vice-Finance Minister reiterated the ministry’s recent statements that a rapid rise in Japan’s long-term interest rates would harm the economy at a time when it remains in mild deflation.
On April 11, the dollar slipped on modest position adjustment by dealers as the greenback’s yield advantage narrowed slightly ahead of upcoming US economic data. Financial markets shifted back to thinking the European Central Bank will raise rates in June, while at the same time trimming back some of their expectations of how high US interest rates will rise in the coming months.
Iran’s announcement that it possesses nuclear technology triggered some flow into the “safe haven” Swiss franc, sending the dollar down 0.4 per cent to 1.2971 francs. On the margins, these developments put the dollar under light, downward pressure, although ranges remained narrow ahead of US trade data. Comments from Minneapolis Fed President in Berlin late in the day that strong jobs growth does not necessarily stoke inflation kept the dollar near its session lows.
Against the yen, the dollar had earlier hit one-month highs around 118.90 yen after the Bank of Japan left interest rates near zero and gave no indication that it would raise them in the near term. But in US trading the dollar erased all its gains to trade down 0.1 per cent on the day at 118.21 yen. The euro was up 0.3 per cent at a session high around $1.2150, and sterling was up 0.3 per cent to $1.7486. The dollar remained stuck in broad ranges.
On April 12, the dollar was up broadly after data showed the US trade deficit came in smaller than expected in February, but gains were limited by the view that this improvement will likely be short-lived. Trading was also partly technically-driven, dealers said, with sovereign banks buying the euro once it cheapened up. The euro’s failure to break above a Fibonacci level at $1.2168, the session high, triggered a barrage of selling, which accelerated on the US trade data.
The US government said the trade gap for February was $65.7 billion, the third widest on record but narrower than economists’ estimates of $67.5 billion. Imports fell 2.3 per cent from the previous month and the trade deficit with China contracted by 22.7 per cent. January’s trade gap was revised slightly higher to a record $68.6 billion, but with crude oil prices nearing all-time highs just above $70 a barrel, the US trade shortfall could widen once again and the dollar would come back under pressure in the next few months, analysts said.
In late New York trading, the euro was at $1.2103, down 0.3 per cent on the day, but above its session low around $1.2067. The euro was at 143.30 yen, down almost 0.3 per cent on the day, while the dollar was up by just 0.1 per cent against the yen at 118.45 yen, having backtracked from an intraday high at 118.61.
Against the Swiss franc, the dollar gained 0.1 per cent to reach 1.2984 francs. Sterling was almost flat on the day at $1.7501. Against the dollar, sterling was up around 0.1 per cent on the day at $1.7509, having retreated from an earlier one-week high of $1.7573 after the US trade data.
On April 13, the dollar was barely moved against the euro or yen as activity wound down ahead of a long Easter weekend and traders trimmed positions ahead of a barrage of US economic data due next week. Data showing a rebound in US retail sales in March and a modest improvement in April consumer sentiment provided some support to the dollar, and helped push benchmark US Treasury yields above 5 per cent for the first time in nearly four years
The euro was flat against the dollar at $1.2113. The dollar was little moved as well against the yen at 118.45 yen. The dollar dipped slightly against sterling and the Swiss franc, but rose against the Canadian and Australian dollars Euro’s net move since opening last week at $1.2115 has been a negligible $0.0002. Major currencies are trapped in tight ranges for the last four trading sessions.
Financial markets were closed on April 14. Markets in Australia, New Zealand, Britain, France, Germany Italy, Switzerland, Canada and the United States were off for the Good Friday holiday.
But the dollar’s gains were limited and traders expect activity to dwindle ahead of a series of potentially market-moving events next week, including Chinese President first official visit to the United States. The dollar was trading at 118.60 yen, up slightly from around 118.55 yen late in New York trading on April 13. The euro stood at $1.2110 virtually unchanged.
THE local currency market opened the week on a negative note and then witnessed bearish trend in the absence of market players amid low trading volumes throughout the week.
