The second quarterly review on the current fiscal year’s economic situation released by the State Bank of Pakistan early this week reveals that the rupee has depreciated by some 3.5 per cent during first eight months of current fiscal year in the wake of deteriorating economic and political environment.

High oil prices have increased importers’ demand for dollars in the local currency market. The rupee is under persistent pressure. Most analysts are of the view that present situation is likely to persist in coming days. The rupee is also under pressure against the euro.

In the inter bank market, the rupee commenced the week on a happy note, moving both ways in the positive direction against the American currency. Due to sufficient supply of dollars, amid quiet trading on March 31, the rupee gained 12 paisa and 10 paisa on the buying and selling counters respectively against the dollar, changing hands at Rs62.72 and Rs62.75 on the first trading day of the week. The dollar had earlier closed last week at Rs62.84 and Rs62.85.

However, on the following day, rising dollar demand pushed the rupee down forcing it to shed three paisa on the buying counter and five paisa on the selling counter to trade at Rs62.75 and Rs62.80 against the dollar on April 1. The rupee continued its downtrend and drifted further against the dollar on April 2, losing three paisa for buying but remaining unchanged at its overnight level on the selling counter to trade Rs62.78 and Rs62.80 due to persistent dollar buying by the importers.

On April 3, the rupee further dipped versus the dollar and shed two paisa on strong dollar demand, trading at Rs62.80 and Rs62.82. The rupee continued its decline versus the dollar on April4, further shedding six paisa against the dollar, which was trading at Rs62.86 and Rs62.88 at close. This week, the rupee in the inter bank market restricted its decline versus the US currency to just two paisa on cumulative basis.

In the open market, the rupee/dollar parity moved in the negative area on the opening day of the week in review, as the rupee lost five paisa against dollar which traded at Rs63.15 and Rs63.25 on March 31 as against previous week close of Rs63.10 and Rs63.20. The rupee continued its weakening trend on April 1 and further lost three paisa against the dollar on persistent rise in dollar demand, changing hands at Rs63.18 and Rs63.28 on the second trading day of the week.

On April 2, the rupee posted a sharp decline of 22 paisa against the dollar in single day trading on strong demand for dollar, which was seen trading at Rs63.40 and Rs63.50. On April 3, the rupee however, managed to reverse its declining trend versus the dollar as it recovered five paisa and traded at Rs63.35 and Rs63.45. The rupee extended its overnight gains versus the dollar on April 4, gaining five paisa to trade at Rs63.30 and Rs63.40, and bringing cumulative decline in the rupee value against the dollar this week to 20 paisa on the open market counter.

Versus the European single common currency, the rupee opened the week on a disappointing note posting sharp losses of 25 paisa and trading at Rs99.55 and Rs99.65 on the opening day of the week against last week close of Rs99.30 and Rs99.40. It, however, resisted sharp fall on the second trading day of the week when it traded at Rs99.50 and Rs99.60, down five paisa against the euro.

On the third trading day of the week in review, the rupee managed to rebound strongly against the European common currency, sharply gaining 75 paisa to trade at Rs98.75 and Rs98.85 after dollar firmed up against the euro in the overseas market. But the rupee overnight strength against the euro proved short lived on the fourth trading day as it lost 24 paisa in terms of euro and traded at Rs98.99 and Rs99.09. However, it managed to recover five paisa on the fifth trading day, changing hands at Rs98.94 and Rs99.05 against the euro. During the week in review, the rupee recovered 35 paisa against the European single common currency.

On the international front, the dollar headed for its biggest quarterly loss against the euro in four years on March 31, after a sharp gain in euro zone prices reinforced the divergent paths of US and European benchmark interest rates. A report showing annual euro zone consumer prices rose in March at their fastest pace since the euro was launched in 1999 sent the zone’s common currency as high as $1.5895, just shy of a record peak set two weeks ago, before investors booked profits and pushed it back to $1.5785 in late trade.

The euro remained up 8.2 per cent against the dollar this year, however, on track for its biggest quarterly gain since 2004. So far this year, though, the dollar has lost more than 10 per cent against the yen, its poorest showing since the third quarter of 1999. The biggest problem for the dollar heading into the second quarter remained expectations of lower interest rates. The Fed has already slashed rates by 3 percentage points since September in a bid to restart flagging growth, pushing the federal funds rate to 2.25 per cent, the second-lowest among major economies, after Japan.

On April 1, the dollar vaulted higher after major banks UBS and Lehman Brothers raised a combined $19 billion to shore up their balance sheets, boosting hopes that the worst of Wall Street’s problems may be over. UBS also wrote down an additional $19 billion in US real estate and related assets, but the news boosted stock prices and the dollar on hopes that the Swiss bank has now purged its books of toxic securities. UBS said it will raise $15 billion in fresh capital through a rights issue of shares.

The dollar surged 2.1 percent to 101.93 yen and 2 percent against the Swiss franc to 1.0131, on track for its biggest daily gain against the franc in four years.

The euro fell 1.1 percent to $1.5595, well off a record high above $1.59 set two weeks ago. Through the first three months of the year, the euro had gained 8.1 percent against the US currency. The Australian dollar fell 0.8 per cent to $0.9054 after the country’s central bank kept interest rates at a 12-year high of 7.25 per cent and issued a statement that curtailed expectations of a further rate rise. The pound underperformed the dollar, down 0.1 per cent at $1.9809.

On April 2, the dollar was up 0.9 percent at 102.76 yen, close to the day’s high of 102.78 yen. The euro was little changed at $1.5613, well off last month’s record high around $1.5905, according to electronic trading platform EBS. Since the last G7 meeting in February the euro has surged against the dollar from around $1.46 to just above $1.59 on March 17. Over the last 10 days the euro has moved from $1.54 to almost $1.59 and then back to current levels. Sterling was up a third of a percent at $1.9821.

On April 3, the dollar clung to slender gains against the euro as mounting signs of stress in Europe’s banking and retail sectors raised fears that the credit crisis was starting to slow the euro-zone economy. The euro was down 0.1 per cent at $1.5665, though it had recovered nearly all the ground lost since touching a $1.5511 session low in overnight trade. Against the yen, the dollar was up 0.1 per cent at 102.35 while sterling rose 0.3 per cent to $1.9939. However, the pound held steady against the dollar, at $1.9888, well off the high for the year of $2.0397 set in March.

At the close of the week on April 4, the dollar edged up 0.3 per cent from late New York trade to 102.60 yen as hedge funds bought the currency. It climbed to a three-week high of 102.95 yen a day earlier on electronic trading platform EBS. The euro was little changed at $1.5660 after having fallen to around $1.5510 on mounting signs of stress in Europe’s banking and retail sectors. Sterling hit a one-week high against the dollar. It jumped as high as $2.0048 after the US data, but pared those gains to $1.9977.