Rupee at six-year low
The rupee had already touched the six-year low against the dollar in the inter-bank market. Most experts fear that current rising trend is likely to persist and dollar may touch historic highs against the local currency in coming weeks.
The rupee in the inter -ank market commenced the week on a stable note against the dollar. Despite tight dollar supplies amid mounting demand, the rupee/dollar parity remained unchanged on April 21, trading at previous weekend level of
Rs64.05 and Rs64.10. Improvement in dollar supplies on April 22 helped the rupee to gain further strength over the American currency, which lost its strength against major currencies in the world market. The rupee managed to gain six paisa on the buying counter and another eight paisa on the selling counter, changing hands versus the dollar on the second trading day at Rs63.99 and Rs64.02.
On April 23, the rupee failed to retain its firmness over the dollar as forward dollar buying by the importers to cover their payment requirements exerted downward pressure on the rupee, which lost 28 paisa on the buying counter and 30 paisa on the selling counter to trade at Rs64.27 and Rs64.32 on the third trading day of the week in review. A sharp rise in dollar demand in the inter bank market forced the central bank to intervene again in the inter bank market on April 24, as speculative dollar buying had pushed the dollar to historic highs.
The SBP intervention, however, proved successful to some extent as it resisted sharp devaluation in rupee value against the dollar, which was seen trading at Rs64.70 and Rs64.75 earlier in the day. The situation further improved with the increase in dollar supplies after the intervention. Towards the close of the market, the dollar was trading at Rs64.54 and Rs64.58, down 27 paisa on the previous day’s trading. As a result of timely interventions by the State Bank of Pakistan (SBP), the local currency resisted sharp losses in its value against the greenback in the inter-bank market.
On April 25, the SBP intervened again in the market and helped the rupee to recover 15 paisa against the dollar which was quoted at Rs64.55 and Rs64.60 on the fifth trading day of the week. The cumulative loss in rupee value against the dollar in the inter bank market was 50 paisa in the entire week in review. At its current level, the rupee has depreciated by 6.5 per cent since end June last year. The dollar in the inter bank market was at Rs60.36 and Rs60.38 on June 30, 2007.
In the open market, the rupee gained 10 paisa in relation to dollar on the week’s opening day, changing hands at Rs64.50 and Rs64.60 on April 21, after having closed at Rs64.60 and Rs64.70 in the previous week. However, the rupee failed to sustain its overnight gains on the following day, as it posted fresh losses of 20 paisa and traded at Rs64.70 and Rs64.80 on April 22. On April 23, the rupee extended its overnight weakness versus the dollar, shedding another 15 paisa to trade at Rs64.85 and Rs64.95 a dollar.
On April 24, the open market came under speculative attack and the dollar almost vanished from the market. It was not available even at the prevailing multiple exchange rates. Exporters were holding back their dollars, while demand for it was mounting to cover oil payments. Reportedly, the SBP had to intervene with 30 to 50 million dollars to check speculation and make dollar available in the market. But pressure on the rupee remained intact. The American currency appreciated significantly. It was changing hands at Rs65.90, incurring a loss of Rs1.20 versus the dollar during the day.
The rupee remained under demand pressure as it further weakened on the fifth trading day, extending fresh losses of five paisa in relation to the dollar. It was about to break Rs66 barrier but SBP presence in the market restricted sharp fall in the rupee value against the dollar, which was seen changing hands at Rs65.85 and Rs65.95 on April 25. This week, the rupee in the open market lost Rs1.25 against the American unit.
Versus the European single common currency, the rupee commenced the week on a positive note, gaining 45 paisa over its previous week close of Rs102.50 and 102.60 to trade at Rs102.05 and Rs102.15 on April 21. The rupee, however, failed to retain its overnight firmness on April 22 as it posted sharp losses on the second trading day, shedding 75 paisa to trade at Rs102.80 and Rs102.90. On April 23, the rupee extended its losses versus the euro further shedding 70 paisa to trade at 103.50 and Rs103.60.
On April 24, the rupee managed to recover modestly from previous two days losses after the euro faced setback on the overseas market. It gained five paisa and traded at Rs103.45 and Rs103.55 in the local market after suffering losses to the tune of Rs 1.45 in the previous two days. The rupee on April 25 managed to hold its overnight firmness against the euro, gaining 60 paisa and changing hands at Rs102.85 and Rs102.95.During the week in review, the rupee suffered losses of 35 paisa against the European single common currency as a result of 65 paisa gains in the last two days of trading.
In the international financial market, the US dollar slipped on the week’s opening day after unexpectedly weak profits from Bank of America dampened investors’ optimism that US financial companies may escape the pinch of the crisis in global credit markets. In late New York trading on April 21, the euro was 0.7 per cent higher at $1.5926. The US currency also came under selling pressure against the Japanese yen as investors continued to fret about the inflationary effect of oil prices. The greenback slipped 0.4 per cent to 103.21 yen. The pound was down 0.7 per cent at $1.9840 against a generally weaker dollar.
On April 22, the euro rallied against the dollar and traded above $1.60 for the first time since its 1999 inception amid growing expectations the European Central Bank’s next move may be a hike in benchmark interest rates.
In New York, it was steady at $1.5995 after rising to $1.6002, just short of an all-time peak of $1.6020 hit on the previous day. The dollar traded down 0.2 percent at 103.07 Japanese yen. The Australian dollar climbed to a 24-year high of $0.9517. Sterling rose nearly 0.7 percent to a session high of $1.9946, in range of the $2.0027 two-week high hit on the opening day of the week.
On April 23, the euro had its biggest drop against the dollar in three weeks. In late trading in New York, the euro was down 0.6 per cent at $1.5893, after falling as low as $1.5862 earlier. The European currency traded at a record $1.6019 a day earlier, according to Reuters, the highest level since its inception in 1999. The euro is up more than 9 percent this year. Against the yen, the dollar was up 0.4 per cent at 103.45 yen. The pound fell 0.8 per cent against a broadly firm dollar to $1.9915 from a session high of $1.9973.
On April 24, the US dollar rose across the board after US government data showed resilience in the labour market, while a key measure of business sentiment in Germany plunged undermining the euro. In late trading in New York, the euro was down 1.3 per cent at $1.5676, its lowest in at least two weeks. Against the Japanese yen, the euro was also down 0.4 per cent at 163.60 yen, while the dollar was up 1.0 percent at 104.34 yen. The pound was down 0.4 per cent against the dollar at $1.9715.
At the close of the week on April 25, the dollar steadied against the euro, keeping gains made on data that showed signs of resilience in the US labour market and separate figures that undermined the single European currency. Investors were reluctant to take fresh positions ahead of the Golden Week string of Japanese holidays that starts next week, while Australian financial markets were closed for a national holiday. The euro edged down 0.1 per cent from late US trade to $1.5670. The dollar was at 104.20 yen, holding near a two-month high of 104.66 yen hit late last week. Sterling was up 0.5 per cent at $1.9840.