Calm prevailed in the local currency market this week. Though demand for dollar existed in the market, its easy supply prevented sharp decline in the rupee value.

There was no rush in the market. Most analysts are of the view that measures taken by the central bank in the past two weeks to restrict speculative trading in currencies have started showing results. The local currency market this week displayed mixed sentiments, with the rupee moving both ways against the dollar and euro. Reports that Friends of Pakistan are actively considering financial support to Pakistan is likely to further improve currency market in coming days.

In the inter-bank market, the rupee commenced the week on a negative note. Tight dollar inflows due to international financial market closure on account of weekly holiday exerted some pressure on the rupee, which shed 30 paisa against the dollar on the first trading day of the week in review. The dollar traded at Rs81.00 and Rs81.10 on November 3 after closing last week at Rs80.70 and Rs80.80. The rupee further extended its overnight weakness against the dollar on November 4, when it suffered another 30 paisa decline to trade at Rs81.30 and Rs81.40.

On November 5, the rupee managed to rebound against the American unit and posted fresh gains of 35 paisa on the buying counter and 30 paisa on the selling counter. The dollar traded at Rs80.95 and Rs81.10 during the day. The rupee managed to hold ground versus the dollar on November 6, due to easy dollar supplies. The rupee/dollar parity traded almost unchanged at Rs81.00 and Rs81.10 after reports that Saudi Arabia has agreed to grant $4 billion in aid and provide oil facility on one-year deferred payment.

On November 7, the rupee lost strength against the American dollar in the inter-bank market and shed 20 paisa on the buying counter and 15 paisa on the selling counter as importers were seen making forward buying to cover up their payment needs. Rise in demand pushed the rupee down with greenback changing hands at Rs81.20 and Rs81.25. The rupee in the inter-bank market lost 50 paisa on the buying counter and another 45 paisa on selling counter amid modest fluctuations versus the dollar this week.

In the open market, the rupee showed modest strength over the American currency and traded in narrow ranges this week after staging a smart recovery on the week’s opening day. During the day, the rupee managed to gain 75 paisa on buying counter and another 50 paisa on selling counter over the previous week’s Rs82.50 and Rs83.00. At day close, the dollar was seen changing hands at Rs81.75 and Rs82.50 amid quiet trading on November 3.

The rupee moved both ways against the dollar on the second trading day, when it traded at Rs81.80 and Rs82.20 after shedding five paisa for buying but gaining 30 paisa on the selling counter on November 4. However, on November 5, the rupee managed to recover 25 paisa on buying counter and 45 paisa on selling counter to trade atRs 81.55 and Rs81.75.

The rupee further extended its firmness over the US currency on November 6, after posting fresh gains of 105 paisa on the buying counter and 75 paisa on the selling counter, changing hands against the dollar at Rs80.50 and Rs81.00. The rupee suffered sharp fall against the American dollar on November 7, shedding 25 paisa on buying and 50 paisa on selling. As a result, the dollar was quoted at Rs80.75 and Rs81.50 at close. During the week in review, however, the rupee in the open market managed to recover Rs1.75 for buying and Rs1.50 for selling against the dollar.

Versus the European single common currency, the rupee showed modest strength trading in narrow ranges this week. It commenced the week on a positive note, gaining 90 paisa to trade at Rs104.15 and Rs105.15 on November 3 after closing last week at Rs105.05 and Rs106.05. On November 4, however, the rupee slipped by five paisa against the euro closing the day at Rs104.20 and Rs105.20. The rupee overnight weakness against euro persisted on the third trading day. The euro was changing hands at Rs104.60 and Rs105.60 on November 5, after the rupee suffered a sharp decline of 40 paisa over the previous day close.

However, the rupee was quick to recover its overnight losses versus the European common currency on November 6, as it managed to gain 135 paisa and traded at Rs103.25 and Rs104. 25. On November 7, the rupee did not show any change against the euro and it continued to trade at its overnight levels of Rs103.25 and Rs104.25. On cumulative basis, the rupee this week managed to recover Rs1.80 against the European single common currency.

In the international financial market, the dollar rose ahead of the US presidential election as lingering concerns about financial markets and the world economy prompted investors to reduce risk and seek safety in dollar-denominated assets on the opening day of the week. Expected interest rate cuts later this week by the European Central Bank and Bank of England hurt the euro and sterling, while data showing US factory activity plunged to a 26-year low last month boosted US and global recession fears.

Consequently, the euro fell 0.7 per cent at $1.2640 but off a session low of $1.2598 on November 4. The dollar rose 0.6 per cent to 99.04 yen, which analysts tied partly to the Bank of Japan’s move to cut interest rates by 0.2 percentage points last week. The high-yielding Australian dollar rose 1.9 per cent to $0.6801. Sterling fell against the dollar, reversing earlier gains as risk aversion returned to dominate sentiment, sending European equities lower and fuelling a rally in low-yielding currencies. The pound was down 1.1 per cent against the dollar at 1.5876.

On November 5, the US dollar tumbled after posting its biggest one-day slide against the euro since that currency’s 1999 launch. Volume was light with Americans heading to the polls to elect a successor to Bush. The dollar fell 2.5 per cent against a basket of major currencies. In late New York trading, the euro was up 2.8 per cent at $1.2992, off a session peak of $1.3028, but still set for its best one-day rise since its inception nine years ago.

The dollar rose 0.6 per cent to 99.740 yen. Sterling gained against a broadly weaker dollar, helped by a fall in risk aversion which boosted European stock markets as investors upped bets on a large cut in interest rates by the Bank of England, up 1.5 percent against the dollar at $1.6073, recovering from the day’s low of $1.5604.

On November 6, the dollar fell against the yen as weak economic data added to fears about the economy but gained on the euro after Democrat Barack Obama’s decisive victory in the US presidential election. Obama’s historic and convincing win helped erase one source of uncertainty for financial markets, analysts said, and that helped boost the dollar against most major currencies. The euro fell 0.9 percent to $1.2912 while sterling dropped 0.7 per cent to $1.5904 and the Australian dollar shed 2.2 per cent to $0.6850. Sterling strengthened against the dollar. It was up by around 1.25 per cent against the dollar at $1.6158.

On November 7, the dollar fell against the euro and a basket of major currencies after data showed steep US job losses in the last three months, fanning fears about a much deeper slowdown for the world’s largest economy. According to Reuters report, October’s 240,000 decline in non-farm payrolls was more than market expectations, but it was the September drop in jobs -- the largest in nearly seven years -- that shocked the currency market. In total over the three months through October, 651,000 jobs have been slashed from payrolls, and 1.2 million so far this year

The report shows the labor market continued to deteriorate at the start of the fourth quarter and we have to keep in mind that it doesn’t yet reflect much of the job losses on Wall Street. Still, analysts are convinced the dollar will continue rallying despite this setback on the employment front and increased expectations for further rate easing. The US data over the last few weeks has raised the market’s aversion to risk, which has helped capital flows back to the dollar. In early New York trading, the euro was up 0.8 percent against the dollar at $1.2795. Against the yen, the dollar slipped 0.4 percent to 97.39 yen. Sterling rose against broadly weaker dollar, which fell on dismal US job data. Sterling was one per cent up at $1.5753 in London.