A COMBINATION of factors has pushed the rupee down against dollar in past few weeks. In view of the political instability in the country and increasing demand for dollars by importers to cover payment requirements, particularly the oil bills, together with outflows of dollars, the rupee is experiencing downward pressure.

Experts were of the view that three interventions by the central bank in a short span of time provided timely support to the rupee and rescued it from breaching Rs62 barrier this week.

However, currency experts have expressed their fear that if the situation did not improve on the political front, the rupee may not be able to hold on to its firmness versus dollar in coming days.

The rupee weakness versus the dollar persisted on the opening day of the week. In the interbank market it lost seven paisa, changing hands at Rs61.20 and Rs61.22 on November 26, as against last week close of Rs61.13 and Rs61.15. The dollar was in demand by the importers and other investors.

The payments turned costlier after record breaking rise in world oil prices, while dollars’ easy supply seems to have dried up because of outflows from the share market following political uncertainty after the emergency imposed by President Musharraf on November 3.

On November 27, the rupee continued its slide as dollar supplies fell short of mounting demand by the importers.

There was a seven paisa fall in rupee value in relation to dollar, which closed the day at Rs61.27 and Rs61.29.

However, the rupee managed to gain 19 paisa after the State Bank of Pakistan intervened in the market on the third trading day.

The central bank reportedly injected approximately 50 million dollars as the rupee at one stage dragged down at Rs61.32 in the early hours on November 28, following the excessive buying by the importers.

After the intervention on November 28, the rupee touched the high level at Rs61.02. But at the close of the day, the dollar was trading at Rs61.08 and Rs61.10. On November 29, the rupee again came under demand pressure and failed to hold its overnight firmness versus the US currency, shedding four paisa to trade at Rs61.12 and Rs61.14. The central bank is closely watching currency movement in the local market. In the past almost two weeks it has intervened four times to save the rupee from breaching Rs62 barrier.

The demand for dollar remained high on the fifth trading day of the week. As a result, the rupee/dollar parity moved down further on November 30. During the day, the rupee shed another 10 paisa and traded at Rs61.22 and Rs61.24 against the dollar. During the week, however, the rupee in the interbank market showed a decline of only two paisa against the dollar, amid sharp fluctuations.

In the open market, the rupee commenced the week on a negative note, extending its week long decline against the dollar. It lost 10 paisa on the buying counter and another five paisa on the selling counter in the wake of hectic dollar buying in the interbank market, where the dollar traded at Rs61.25 and Rs61.30 on November 26, after having closing last week at Rs61.15 and Rs61.25.

On the second trading day, currency players in the open market witnessed a sharp decline in the rupee/dollar parity, as the rupee lost 15 paisa and traded at Rs61.40 and Rs61.50 against the dollar on November 27.

On November 28, the rupee resisted the steep fall in its value. It, however, continued its weakening trend versus the dollar, losing five paisa to trade at Rs61.45 and Rs61.55.

Rising trend was witnessed in the open market as the President Pervez Musharraf took oath as a civilian President on November 29, a day after quitting as army chief.

The rupee managed to revert its falling trend and recovered 20 paisa against the dollar, trading at Rs61.25 and Rs61.35 on the fourth trading day. On November 30, the rupee held its overnight levels depicting no change on the buying counter, while it gained five paisa on the selling counter to trade at Rs61.25 and Rs61.30.

Versus the European single common currency, the rupee further extended its weakness on the opening day of the week in review and lost 10 paisa to trade at Rs90.75 and Rs90.85 on November 26, as compared to previous week close of Rs90.65 and Rs90.75.

The falling trend persisted on November 27, when the rupee made a drastic fall of 33 paisa more, changing hands at Rs91.08 and Rs91.18 against the euro.

The rupee, however, managed to display a turnaround on the third trading day, as it inched up with a gain of three paisa against euro to trade at Rs91.05 and Rs91.15 on November 28. It further gained 20 paisa on the fourth trading day, changing hands versus the euro at Rs90.85 and Rs90.95 on November 29. But it failed to hold its firmness over euro on November 30, when it lost 15 paisa and traded at Rs91.00 and Rs91.10 against the European common currency. This week, the rupee on cumulative basis lost 35 paisa to euro.

In the international financial markets, the dollar slid further to a fresh 2-1/2-year low against the yen on the opening day of the week in review, which was in line with falls in US equities, as renewed credit worries affirmed expectations that more US rate cuts are imminent.

Investors are on edge about fallout from the credit crunch as the approaching year-end may force them to dump assets or scramble for cash to get books in order in strained markets. Worries about the US economy and expectations for additional Federal Reserve interest rate cuts have caused the dollar’s broad tumble.

In New York, the dollar dropped to 107.23 yen on November 26, the lowest since June 2005, according to Reuters data. It last traded at 107.28, down nearly 1 percent from the previous week close. Developments in the money markets in the United States are encouraging expectations of a December rate cut and that is weighing on the dollar. The euro was up 0.3 per cent at $1.4878, within sight of the lifetime high of $1.4966 set last weekend. Sterling recovered some ground against the dollar. The pound was up 0.33 per cent versus the dollar at $2.0671.

On November 27, the dollar rose sharply against the yen in the Tokyo session after the Citi report, sparking the unwinding of short positions on the greenback, and that rally spilled over to other currencies.

The dollar pulled away from a 2-1/2-year low against the yen touched on the opening week to trade at 108.85, up 1.4 per cent and on track for its biggest one-day gain since late August. The euro fell 0.4 per cent to $1.4825, more than a cent below last week’s record highs at $1.4966. The dollar rose 0.8 per cent against the Swiss franc to 1.1051. Sterling was down 0.1 percent against the dollar at $2.0688.

On November 28, the dollar edged lower against the euro and trimmed gains versus other European currencies as comments from a Federal Reserve official and a key economic report affirmed expectations for further rate cuts.

The US currency, however, posted steep gains against the yen, buoyed by sharp gains in the stock market, with investors wading back into riskier trades. In New York, the euro edged up against the dollar to $1.4833 after trading lower for most of the session. It fell earlier to $1.4710, a one-week low.

The dollar traded 1.2 per cent higher against the yen at 110.11 yen after trading as high as 110.42, a one-week high. Gains in the dollar versus the yen were in line with a surge in the US stock market, which rose on the view that more Fed rate cuts are forthcoming. The dollar rose 0.6 per cent against the Swiss franc to 1.1115, earlier hitting a one-week peak of 1.1195. The pound was steady against the dollar at $2.0693, recovering from a low of $2.0583 set earlier in the session.

On November 29, the dollar rallied against most currencies buoyed by demand from US corporations seeking to square their books by month-end and those scrambling for cash to cover a seasonally thin year-end period. In New York the euro was down 0.6 percent against the dollar at $1.4739.

The dollar, however, slipped 0.2 per cent against the yen to 109.93. The pound was down around one per cent against the dollar at $2.0608, having earlier slipped below $2.06.

At the close of the week on November 30, the dollar rose against the yen after comments by Federal Reserve Chairman cemented expectations for more interest rate cuts.

The dollar climbed around 0.5 per cent to 110.35 yen, near the day’s high around 110.45 yen and recovering from a 2-1/2-year low of 107.22 yen hit a week ago.

The euro was little changed at $1.4740, pulling away from the day’s high of $1.4781 and staying off a record peak of $1.4968 touched late last week. The pound fell by 0.3 per cent at $2.0552.