Local currency market witnessed mixed sentiments this week, with the rupee resisting sharp declines versus the American currency but attempting to touch record lows against the European single common currency. The supply of dollars was smooth as the State Bank of Pakistan (SBP) closely monitoring the situation. At the same time, increased inflows of workers remittances abroad eased dollar supplies into the market to meet the rising demand. Most analysts are of the opinion that sharply deteriorating trade and current account balances will keep local currency under pressure in coming weeks.

The inter-bank market commenced the week on a positive note as high dollar inflows helped the rupee to stage a sharp turnaround, gaining 64 paisa on the buying counter and 61 paisa on the selling counter, which traded at Rs62.20 and

Rs62.25 on March 24, against previous week close of Rs62.84 and Rs62.86. The sharp recovery in the rupee/dollar parity on March 24 proved short lived, as increased importers’ demand for dollars on the second trading day exerted downward pressure on the rupee, which lost 40 paisa for buying and 37 paisa for selling to trade at Rs62.60 and Rs62.62 on March 25.

The rupee extended its weakness over the dollar on the second day in a row due to persistent demand for importers. It shed another 20 paisa on the buying counter and 22 paisa on the selling counter on the third trading day of the week in review, changing hands versus the dollar at Rs62.80 and Rs62.84 on March 26. It, however, managed to trade unchanged on March 27. On March 28, the rupee traded unchanged at its overnight level on the buying counter but recovered two paisa on selling counter, changing hands at Rs62.80 and Rs62.82 against the dollar. During the week, the rupee in the inter bank market gained four paisa against the American currency.

In the open market, the rupee continued its downtrend on the opening day of the week in review, extending its overnight weakness versus the dollar. It shed five paisa over the previous week close of Rs63.15 and Rs63.25, changing hands at Rs63.20 and Rs63.30 on March 24. The rupee, however, managed rebound against the dollar on the second trading day, recovering 50 paisa on the buying counter and another 45 paisa on the selling counter to trade at Rs62.70 and Rs62.85 on March 25. On March 26, the rupee failed to hold its overnight strength over the US currency, amid rising demand for dollars, and shed 35 paisa for buying and another 25 paisa for selling to trade at Rs63.05 and Rs63.10 against the dollar.

The rupee further extended its overnight weakness against the dollar on March 27, when the rupee shed five paisa on the buying counter and ten paisa on the selling counter and traded at Rs63.10 and Rs63.20 against the dollar. However, due to balanced demand and supply of dollar on March 28, the rupee/dollar parity remained unchanged at its overnight levels.

Versus the European single common currency, the rupee maintained its upward trend on the opening day of the week in review. After closing last week at Rs97.09 and Rs97.19, the rupee gained 29 paisa, changing hands against the euro at Rs96.80 and Rs96.90 on March 24. On the following day, however, the rupee suffered fresh losses of 45 paisa and traded at Rs97.25 and Rs97.35 per euro. On March 26, the rupee further posted a sharp fall of 85 paisa against the euro on buying and 75 paisa on selling to trade at Rs98.10 and Rs98.30.

The rupee weakness versus the euro persisted on March 27, as the single European currency expanded its winning ground in terms of the local currency, gaining

Rs1.20 over the overnight levels to trade at Rs99.30 and Rs99.40. Finally it ended the week unchanged versus the euro trading at the overnight levels of Rs 99.30 and Rs 99.40 on March 28. This week, the rupee suffered a loss of 121 paisa against the euro.

In the international financial markets, the dollar rose against a basket of currencies on the week’s opening day in thin post-Easter trade, as most financial markets were closed for the Easter holidays. In late New York trade, the dollar raced to a session peak of 100.89 yen, the highest since March 14, and well off a nearly 13-year low of 95.77 yen posted last week. It last traded at 100.67, up 1.1 per cent from previous week close. The euro was flat at $1.5425 after slipping to a session trough of $1.5343 and still off a record high of $1.5905 touched last week. Traders said there was also interest to buy the European single currency below $1.54, limiting its losses.

On March 25, the dollar fell broadly, posting its steepest loss against the euro in two weeks, sparking a rebound in commodity prices and helping to preserve investors’ appetite for risk. The euro climbed to a session peak $1.5618. In late New York trade, it was up 1.2 per cent on the day at $1.5609, posting its biggest one-day rise since March 12, according to Reuters data. The single currency is down about 1.9 per cent from last week’s record high at $1.5904, but still up almost seven per cent since the beginning of the year.

Concerns about the health of the US economy and the global financial sector, pushed the dollar weaker versus the low yielding Japanese yen and Swiss franc. Against the yen, the dollar slid to an intraday trough of 99.640 yen and erased earlier gains above 101 yen. It was last trading at 100.20 yen, down 0.5 per cent. Against the Swiss franc, the dollar fell 1.00 percent to 1.0079 francs. Sterling bounced up against the dollar, profiting from a broad-sell off in the US currency fuelled by data showing an unexpectedly large fall in February US consumer confidence. It was up half a per cent at $1.9962.

On March 26, the dollar fell for a second straight session, weighed down by surprisingly weak US durable goods orders and remarks by European Central Bank chief that euro zone rates were at the right level. Analysts said his comments dampened expectations of a swift ECB interest rate cut. That left investors focusing on the widening interest rate differential between the United States and the euro zone. They drove the euro to a session high of $1.5845, within spitting distance of an all-time peak of $1.5905 touched last week.

The dollar managed to trim its losses against the yen after a slightly better-than-expected US new home sales report for February, although the data did little to ease concerns about the beleaguered sector and the overall economy. Interest rate futures are pricing in a roughly 46 percent chance of a 50 basis points cut in the fed funds rate target next month, to 1.75 percent. The dollar dropped to a session low of 98.900 yen before regaining some ground to trade around 99.140 yen, down 0.9 per cent on the day. Against the Swiss franc, the dollar tumbled 1.6 per cent to 0.9903 francs.

The dollar’s losses against the yen and the Swiss franc were attributed to declining US stocks. The dollar had some edge versus the Canadian and New Zealand dollars. Sterling headed towards record lows versus the euro and fell against the dollar after Bank of England policymakers said the pound faced downside risks and reiterated a bias towards cutting interest rates. The pound fell a third of a percent to $1.9985.

On March 27, the euro was down 0.5 per cent on the day at $1.5766, a bit more than 1 cent below last week’s record highs above $1.59. But the euro was still up more than eight per cent this quarter, remaining on track for its strongest quarterly performance since late 2004. The dollar briefly rose above 100 yen. It was last trading at 99.77 yen, up 0.8 per cent on the day. Against the Swiss franc, the dollar gained 0.6 per cent 0.9944. The pound also climbed versus the dollar and was set to clock up its biggest weekly gain since late 2006.

At the close of the week on March 28, the dollar fell back towards record lows against the euro as rumours of more troubles at US investment banks kept investors on edge about the ongoing fallout from the credit crisis. The euro edged up to $1.5789 from around $1.5770 in late US trade, turning back towards its record high of $1.5905 after making a pause from sharp gains made earlier this week. The US currency was flat at 99.62 yen staying in sight of a 13-year low of 95.77 yen. The dollar was little changed at 0.9932 francs holding near an all-time low of 0.9630 francs hit earlier this month. The pound was down 0.7 per cent at $1.9941.