The declining trend in rupee value against the dollar and euro continues. The rupee in the local market is under tremendous pressure due to weak economic indicators and uncertain political situation.

Economists are worried over the continued declining trend in rupee value. Steps are needed to stop outflow of funds. The country’s foreign exchange reserves have fallen further to $8.82 billion this week. At the same time, trade and payment gap is widening.

The new PPP government has so far failed to outline its economic strategy to deal with current problems being faced by the country. Prevailing situation has shattered confidence of local and foreign investors.

The weakening trend in the rupee/dollar parity persisted in the local currency market on the opening day of the week in review. After closing last week at Rs78.10 and Rs78.20, the rupee continued its decline versus the dollar in the interbank market, shedding 10 paisa on the buying counter and another five paisa on the selling counter to trade at Rs78.20 and Rs78.25 due to short dollar supplies on September 22. However, it managed to hold ground on the following day and remain unchanged at its overnight levels on September 23.

Improved dollar supplies on September 24 due to higher inflows of overseas remittances helped the rupee to resist further decline against the dollar which traded at Rs78.15 and Rs78.20 after gaining five paisa on the third trading day. But it failed to hold its overnight firmness versus the dollar on the fourth trading day and lost 10 paisa on strong dollar demand from the importers, changing hands at Rs78.25 and 78.30 on September 25.

The rupee succeeded in reversing the declining trend in the rupee/dollar parity on September 26 on reported improvement in dollar inflows as overseas Pakistanis are sending foreign remittances ahead of Eid-ul-Fitr.

As a result, the rupee posted a modest recovery against the dollar, gaining 10 paisa to trade at Rs78.15 and Rs78.20 at the close of the day. During the week in review, the rupee in the interbank market restricted its losses amid fluctuations to five paisa against the dollar.

In the open market, the rupee commenced the week on a dismal note dropping 20 paisa to trade at Rs78.10 and Rs78.50 against the dollar on September 22, compared to previous weekend’s levels of Rs77.90 and Rs78.30.

The rupee traded unchanged on September 23. It, however, managed to recover 15 paisa for buying while it managed to hold its overnight rate on the selling counter on the third day of the week in review, changing hands versus the dollar at Rs77.95 and Rs78.50 on September 24.

On September 25, the rupee, unable to hold its overnight firmness against the dollar, shed 25 paisa on the buying counter but maintained its overnight level on the selling counter, changing hands at Rs78.20 and Rs78.50.

On September 26, the rupee maintained its overnight level unchanged on the buying counter but it lost 10 paisa on the selling counter, changing hands at Rs78.20 and Rs78.60 against dollar. However, cumulative loss in the rupee value in relation of dollar in the open market was 30 paisa this week.

Versus the European single common currency, the rupee lost 100 paisa over its weekend’s levels of Rs111.80 and Rs112.00 and traded at 112.85 and Rs113.00 on September 22. However, it extended its weakness on both counters on September 23, when it lost 105 paisa on buying counter and 110 paisa on selling counter and traded against the euro at Rs113.90 and Rs114.10 on September 23.

But on the third trading day of the week in review, the rupee managed to rebound against the euro gaining 100 paisa for buying and 95 paisa for selling to trade at Rs112.90 and Rs113.05 on September 24.

On September 25, the rupee again drifted lower against euro, losing 48 paisa on the buying counter and 43 paisa on the selling counter and traded at Rs113.38 and Rs113.48. On September 26, the rupee further extended its weakness versus the European single common currency posting fresh losses of 22 paisa on the buying counter and another 32 paisa on the selling counter.

At the close of the day euro was trading at Rs113.60 and Rs113.70. During the week in review, the rupee shed 180 paisa against the European common currency.

In the international financial market, the US dollar tumbled, hitting multi-week lows against the euro and against sterling on the week’s opening day as the US government’s bailout plan to ease a financial credit crisis reignited worries about the country’s massive budget deficit.

The Congressional Budget Office has forecast a record US budget shortfall of about $438 billion in the next fiscal year, excluding the cost of the bailout. The rescue package is expected to raise the government’s debt ceiling 6.6 per cent.

In New York the euro was trading at three-week highs of $1.4837, up 2.5 per cent on the day, putting the European currency on track for its biggest one-day gain since its inception in January 1999.

The dollar fell 0.8 per cent to 106.55 yen, dropping from a high of 108.04 hit on trading platform EBS late last week. Against the Swiss franc, the dollar fell more than three per cent to last trade at 1.0703 francs. The pound was up 0.7 per cent at $1.8454, having earlier hit a 3-1/2 week high at $1.8480 compared with $1.8315 in US at the close of last week.

On September 23, the dollar was kept on the defensive on concerns about the cost of financing the $700 billion bailout package to shore up the financial system and ease the credit crisis engulfing Wall Street. However, trading was subdued in Asia due to a holiday in Japan.

In addition to worries about expanding the US budget deficit to pay for the bailout, doubts crept into market thinking on the effectiveness of the package to resolve a crisis that has seen the collapse of Lehman Brothers, the takeover of Merrill Lynch and an $85 billion bailout of American International Group.

The dollar fell as low as 105.17 yen before paring losses to stand down 0.1 per cent at 105.30 amid concerns that the proposed bailout could push the dollar towards a four-month low of 103.54 yen hit last week, when investors rushed for safe haven assets off the back of plunging equities after the failure of Lehman Brothers.

The euro rose as high as $1.4826 earlier before cooling slightly to stand up 0.15 per cent at $1.4810. At one point, the single currency swung as high as 1.4866 dollars, its highest level since August 22 and biggest one-day move since the euro’s creation in 1999. It rose to a one-month high of $1.4867 on September 22, when the currency staged its biggest one-day gain since its inception in January 1999.

The dollar stood at 1.0730 Swiss francs. Sterling was steady on the day against the dollar, erasing earlier gains as the US currency enjoyed a boost as US policymakers urged Congress not to delay approval for the planned bailout of the financial system. UK currency was steady at $1.8550. Still, the pound hovered near a one-month high of $1.8643 hit a day earlier.

On September 24, the euro rose as high as $1.4738 following the data, from about $1.4719 just before.

The currency last traded at $1.4727, up 0.6 percent from the preceding day’s level. Sterling consolidated near recent 1-month highs versus the dollar as doubts about the US government’s proposed $700 billion bailout plan to tackle the financial crisis pinned the greenback down. The pound was up about 0.3 percent at $1.8560, not far off a one-month high of $1.8643 set on September 22.

On September 25, the dollar fell against a basket of currencies as investors continued to fret about whether political wrangling will delay approval of the $700 billion US package to mop up bad bank debt. The euro was up 0.4 percent against the dollar at $1.4666.

Against the yen, the dollar slipped 0.3 percent to 106.26 yen, despite Japanese data earlier showing the country’s trade balance swung into deficit in August for the first time since January as exports slowed and import costs rose. The pound was up 0.5 percent at $1.8556, after hitting a one-month high of $1.8671.

At the close of the week on September 26, the euro fell against the dollar after eurozone sources said market expectations about European Central Bank rate cuts early next year or even sooner are reasonable. The euro slipped to $1.4572, from about $1.4590 before the news hit the wires.

It last traded at $1.4593, down 0.2 percent on the day. The dollar fell 0.8 percent to 105.65 yen, but stayed in a rough range of 105-108 yen this week.

Sterling rose against the dollar. The pound was up 0.3 percent on the day at $1.8440, having hit a one-month high on September 25 at $1.8671.