In the local currency market, the rupee continued its downtrend versus the American and European currencies. Demand for dollars by the importers to meet their payment needs existed throughout the week. However, sufficient supplies of the American unit, mainly due to increased inflows of workers remittances, resisted the rupee from breaking Rs64 barrier during this week.

Similarly, euro continued its advances versus the local currency. Market players were expecting the euro to cross Rs100 mark anytime this week, but the rupee managed to resist euro advances and the market players noted some quick recoveries towards the close of the week.

The rupee in the inter-bank market commenced the week on a positive note in relation to dollar, gaining five paisa on the buying counter and another six paisa on the selling counter to trade at Rs62.82 and Rs62.84 on March 17 after the American currency managed to trim some losses in the overseas market, hitting a record low versus euro and a 12-year low against yen following reports that J.P. Morgan Chase would buy cash-trapped Bear Stearns and the Federal Reserve will further cut its discount rate. Last week, the rupee in the inter-bank market had closed versus the dollar at Rs62.87 and Rs62.90.

On March 18, however, the rupee failed to hold its overnight firmness versus the dollar as it shed two paisa, changing hands at Rs62.84 and Rs62.86 after the dollar plunged in the international market following the Federal Reserve emergency step of cutting its discount rate and opening up discount window lending to major investment banks, a tool not used since the Great Depression. The latest data published on March 18, showing a significant rise in home remittances sent by overseas Pakistanis, provided support to the rupee and resisted any sharp fall against the dollar on March 19, when it traded almost unchanged at Rs62.84 and Rs62.87.

The rupee in the inter bank market continued to weaken against the dollar on March 20, further shedding four paisa on the buying counter and three paisa on selling counter , changing hands at Rs62.88 and Rs62.90. Trading in the currency market remained suspended on March 21, being public holiday on account of 12 Rabi-ul – Awal. During this week, the rupee/dollar parity in the inter bank market remained intact amid fluctuations.

In the open market, the rupee continued to weaken against the dollar and lost 13 paisa amid higher demand to trade at Rs62.98 and Rs63.08 on the opening day of the week in review. On March 18, the parity moved both ways in narrow range, gaining three paisa on buying counter and losing two paisa on selling counter to trade at Rs62.95 and Rs63.10. The rupee crossed Rs63 barrier on the third trading day as it further lost 10 paisa for buying and five paisa for selling to trade at Rs 63.05 and Rs 63.15 on March 19.

The downtrend in the rupee/dollar parity persisted on the fourth trading day as the rupee slipped by another eight paisa versus dollar, closing the week at Rs63.13 and Rs63.23 on March 20, as the local currency market remained closed on account of public holiday on March 21, being 12 Rabi-ul-Awal. On cumulative basis, the rupee in the open market lost 28 paisa against the dollar this week. It had closed last week at Rs62.85 and Rs62.95.

Versus the European single common currency, the rupee touched record lows crossing Rs99 barrier on the first trading day of the week in review, falling sharply by 125 paisa to trade at Rs99.25 and Rs99.35 on March 17, after closing last week at Rs98.05 and Rs98.15. The rupee, however, managed to stage a turnaround by recovering 40 paisa, changing hands at Rs98.85 and Rs98.95 on March 18.The rupee maintained its overnight firmness against the euro on March 19, when it recovered another 25 paisa and traded at Rs98.60 and Rs98.70. The rupee continued its upward trend versus the euro on March 20, gaining another 60 paisa to trade at

Rs98.00 and Rs98.10. In the last three successive days, the rupee had recovered 85 paisa against the euro.

In the international financial markets, the US dollar tumbled to a 12-1/2 year low against the Japanese yen and also saw record lows against the euro and the Swiss franc on the week’s opening day, as emergency liquidity-boosting measures by the Federal Reserve over the weekend failed to ease worries about the US financial system. The greenback sold off in reaction to the Fed cutting its discount rate by 25 basis points to 3.25 per cent and after the opening up of the Fed’s discount window lending to major investment banks, a tool not used since the Great Depression. The Fed’s move accompanied the purchase of Bear Stearns by J.P. Morgan Chase for just $2 a share, less than one-tenth of the bank’s share price last weekend.

The US dollar slid as much as three per cent to below 96.00 yen on March 17, its lowest since 1995, bringing year-to-date losses to more than 13 per cent. It fell as low as 95.77 yen according to Reuters data, and saw historic lows 0.9637 Swiss francs after breaking below parity last week. The euro rose as high as $1.5904, having already added around four per cent in the first two weeks of March, roughly doubling its year-to-date gains. It last traded at $1.5745. Sterling was down 0.4 per cent at $2.0107 against the dollar, which continued to struggle elsewhere

On March 18, the dollar posted its largest single-day gain against the yen in nine years and rallied against the euro after the Federal Reserve cut the benchmark US interest rate by a less-than-expected 75 basis points to 2.25 per cent. Some investors had been betting the US central bank could cut by as much as 100 basis points.

Analysis said while the cut was smaller than expected, there were likely more to come. The US dollar is now the second lowest yielding currency in the developed world thanks to the Federal Reserve’s 75 (basis point) rate cut.

The dollar was up 2.43 per cent on the day versus the low-yielding yen but, at 99.55 yen, stayed under the 100 mark breached last week. It was the largest one-day percentage advance since February 16, 1999. The dollar also managed to break back above parity against the Swiss francs at 1.0013 Swiss francs. The euro was down 0.6 per cent at $1.5635, it was the largest one-day percentage loss for the euro in six weeks. Previous day’s record peak for the euro/dollar was $1.5904.

Sterling was up 1.04 per cent on the day at $2.0189.

On March 19, the dollar fell against the yen as investors remained bearish on the US currency amid concerns about the health of the US economy and financial system. The dollar recovered from the day’s lows however, in part bolstered by news that regulators have lifted capital limits on mortgages that Fannie Mae and Freddie Mac may purchase. That could free up as much $200 billion in liquidity for the stricken mortgage market. Still, the news was not enough to completely offset the overall negative market sentiment on the dollar, as US interest rates were still seen heading lower even after a 75 basis-point easing to 2.25 per cent by the Federal Reserve.

In late New York trading, the dollar was down 1 percent against the yen at 98.990 yen, trimming losses following the Fannie and Freddie announcement. It hit a 13-year trough of 95.71 yen on March 17. The dollar was also down 0.2 per cent against the Swiss franc trading at 1.0001 francs, way above record lows at 0.9637 struck last week. The euro was down 0.1 per cent at $1.5608, down from the day’s highs at $1.5785 but up from the low of $1.5584. The euro/dollar touched a record peak of $1.5904 March 17. Sterling fell to a two-week low versus a broadly softer dollar, at $1.9863.

On March 20, the dollar rallied as investors took profits from oil, gold and other commodities, repatriating their cash back into the beleaguered US currency ahead of the Easter break. Oil was down almost 4 percent, dipping below $100 a barrel, gold flirted with its biggest weekly loss in a quarter of a century, and platinum was well on track for its steepest weekly decline in over 20 years. Trading was choppy with Japan closed for the Spring holiday and as banks and funds scrambled for funds over the long Easter weekend. Most of Europe is shut on March 21 and March 24 for Good Friday and Easter break.

The European Central Bank and Bank of England pumped 15 billion euros and 5 billion pounds, respectively, into the banking system on March 20 via short-term loans to help tide banks over the holiday period. Japan’s financial markets were closed on March 20.