Continued increase in crude oil prices in the international market is exerting downward pressure on the rupee/dollar parity in the local currency market. Year-end payments need have compelled importers to make fresh buying of dollars in the local currency market. Surge in the oil prices in the world markets played a basic role in the sharp rise in the local market.

The demand for dollar has surged significantly at a time when there is an outflow of dollars due to weak economic indicators and uncertain political outlook. The current account deficit has broken all record at about $13bn in 11 months of the current fiscal year. Though, SBP measures in the past few months have resisted sharp declines in rupee value against the dollar and euro, dealers said outflows from the stock market were likely to add some pressure on the rupee in the coming days

The rupee commenced the week on a firm note in the inter bank on June 23, as it managed to hold its firmness due to easy inflows of US currency. It depicted no major change in the weekend level on the buying counter but shed five paisa on the selling counter, trading at Rs67.40 and Rs67.50 against the dollar after closing previous week at Rs67.40 and Rs67.45. However, increased dollar demand particularly from importers on June 24, mainly to cover up their oil payment bills, which have risen sharply in the face of increasing oil prices in the international market pushed the rupee down further. The rupee posted fresh losses of up to 30 paisa against the dollar in single day trading, changing hands at Rs67.70 and Rs67.80.

The rupee continued its slide versus the dollar on June 25, as high dollar demand persisted exerting downward pressure on the local currency, which further shed 10 paisa on the buying counter and five paisa on the selling counter to trade at Rs67.80 and Rs67.85. The downslide persisted in the rupee/dollar parity on the fourth consecutive day with the rupee suffering fresh losses of 15 paisa on the buying and another 10 paisa on the selling counters to trade against the dollar at Rs67.85 and Rs67.90 on June 26. Finally, the rupee closed the week on June 27, at Rs68.00 and Rs68.05 after shedding 15 paisa more against the dollar. The rupee in the inter bank market suffered up to 60 paisa fall against the American currency this week.

In the open market, the rupee firmly held its overnight levels against dollar on the first trading day of the week, trading unchanged at its overnight levels of Rs68.30 and Rs68.50. But the overnight firmness in the rupee/dollar parity proved short lived on the second trading day, when the dollar gained 10 paisa versus the rupee, changing hands at Rs68.40 and Rs68.60 on June 24. The rupee continued weak against the dollar on June 25 and suffered fresh losses of 10 paisa against the dollar to trade at Rs68.50 and Rs68.70.

The rupee extended its weakness versus the US currency on June 26, making some fresh losses of five paisa on the buying counter but remained unchanged on the selling counter, changing hands in relation to dollar at Rs68.55 and Rs68.70. On June 27, the rupee, however, gained 15 paisa versus dollar on the buying counter and another 10 paisa on the selling counter, changing hands at Rs68.40 and Rs68.60. This week, the rupee in the open market lost 25 paisa against the dollar on cumulative basis.

Versus the European single common currency, the rupee showed a fluctuating trend this week. It opened the week on a dismal note as the rupee failed to maintain its steady trend and posted 30 paisa loss over the previous week close, changing hands at Rs106.10 and Rs106.20 on June 23, against Rs105.80 and Rs105.90 on June 21. On the second trading day, however, the rupee firmed up gaining 75 paisa to trade at Rs105.35 and Rs105.50 on June 24.

On the following day, the rupee suffered a sharp decline against the euro, shedding 45 paisa to trade at Rs105.80 and Rs105.95 on June 25. On June 26, the rupee extended its overnight weakness versus the European single currency posting fresh losses of 80 paisa and traded at Rs106.60 and Rs106.75. On June 27, the rupee gained 10 paisa against euro and traded at Rs106.50 and Rs106.65. During the week in review, the rupee lost 85 paisa against the European single common currency.

In the international financial markets, the dollar rose on the week’s opening day, as weak euro zone data took the steam out of last week’s euro rally and investors braced for a Federal Reserve statement this week that will likely focus on rising US inflation pressures. The euro fell half a percent to $1.5520 on June 23. The dollar rose nearly 1 percent against the Swiss franc to 1.0456 francs. Against the yen, the greenback rose 0.4 per cent to 107.30 yen. The dollar has gained despite firmer commodities. The pound was 0.7 per cent lower against a broadly firmer dollar at $1.9605, on course for its biggest daily percentage fall in two weeks.

On June 24, the euro was still up 0.3 per cent at $1.5569. It earlier hit a session high of $1.5621 after data showed high prices sapped Americans’ confidence in June and pushed expectations of future prosperity to an all-time low. Meanwhile, the headline consumer confidence number sank to a 16-year low. The dollar fell slightly to 107.75 yen from sessions lows at 107.37. The dollar fell 0.4 per cent to 1.0410 Swiss francs, with the franc benefiting from market talk that Swiss bank UBS was a take-over target for HSBC. Sterling was trading up 0.3 percent at $1.9714 after its biggest one-day percentage fall in 1-1/2 weeks on June 23.

On June 25, the dollar fell to two-week lows versus the euro, as the Federal Reserve failed to give a strong enough signal that it would aggressively raise interest rates this year. The euro rose to two-week highs versus the dollar at $1.5686, up 0.8 percent on the day. It was still up 0.7 per cent at $1.5674. The dollar fell 0.1 percent to 107.70 yen. Against the Swiss franc, the dollar slid 0.6 percent to 1.0351 francs, while the pound rose 0.2 per cent to $1.9755. Sterling was up 0.5 per cent versus the dollar at $1.9849, having earlier risen as high as $1.9896 - a level last seen in early May.

On June 26, the US dollar slumped hitting its lowest level against the euro in nearly three weeks, as investors reduced their expectations for a Federal Reserve interest rate rise this year, and as US stocks slid. The Federal Reserve said inflation risks had increased and a rate rise is likely at its next policy meeting in August, while the European Central Bank said it may lift interest rates in July to fight inflation. That helped push the euro near a three-week high at $1.5766 before it eased to $1.5760, up 0.6 percent from the previous day.

The US dollar fell more than one per cent against the yen to 106.73 yen. The dollar dropped 1.2 per cent versus the Swiss franc to 1.0222 francs, the lowest since June 9, and posting its largest daily loss in about three weeks. Sterling retreated from the previous day’s two-month high versus the dollar, as higher oil prices and a sell-off in equity markets weighed. Inflationary pressures played heavily on investors’ thoughts as US crude rose to a record $141.71 a barrel. It was down 0.1 percent versus the dollar at $1.9866, retreating from previous day’s two-month high of $1.9896.

At the close of the week on June 27, the dollar edged up thanks to demand from Japanese investors seeking higher yields, a day after taking a hit from a sell-off in US shares and renewed worries about the health of major financial firms. A wave of buying from Japanese importers, mutual funds and margin traders gave a boost to the dollar and higher-yielding currencies like the New Zealand dollar, which had tumbled on along with the 3 percent drop on Wall Street. The demand from Japanese players also prompted some traders to cover short positions in the dollar, even as many market players are looking for the US currency to potentially drop back near a record low against the euro.

In early Tokyo trade, the dollar rose 0.2 per cent against the yen to 107.02 yen recovering from a low around 106.65. High oil and commodities prices were underpinning Japanese importers’ appetite for the dollar, helping put a floor under the dollar against the Japanese currency, traders said. The euro eased 0.1 percent to $1.5727 on profit-taking, after rising to around $1.5770, its highest in nearly three weeks. Sterling retreated from the previous day’s two-month high versus the dollar, as higher oil prices and a sell-off in equity markets weighed. It was down 0.1 per cent versus the dollar at $1.9866, retreating from previous day’s two-month high of $1.9896.