Rupee makes sharp recovery
The dollar which had touched Rs70 some two weeks ago is now Rs66 in the inter bank market. However, most leading currency analysts and economists are still of the view that the rupee recovery is temporary and the market could see sharp falls in its value in relation to dollar and euro soon after the 2008-09 budget, which is expected to be presented in the parliament on June 7.
The rupee in the inter bank market commenced the week on negative note as dollar demand by the importers existed amid tight supplies. The rupee, which had gained ground against the US currency on SBP support last week, however failed to hold ground as extended its weakness against the dollar on the opening day of the week and lost 10 paisa to trade at Rs68 and Rs68.10 on May 26, against previous week close of Rs67.90 and Rs68. The rupee/dollar parity continued its downtrend on the second trading day of the week, with the rupee shedding 10 paisa on the buying counter and five paisa on the selling counter, changing hands versus the dollar at Rs68.10 and Rs68.15 on May 27 because of higher payments for oil bills.
On May 28, the rupee in the inter bank market managed to display strength over the dollar following improvement in dollar supplies after the central bank agreed to defer the implementation of a 50 per cent cap on banks’ exposure to the capital market for one year. The rupee gained 20 paisa in relation to the dollar on the buying counter and another 15 paisa on the selling counter and traded at Rs67.90 and Rs68.00. The rupee displayed further improvement in its value against the American unit on May 29, as it managed to recover 65 paisa on the buying side and 50 paisa on the selling side, trading at Rs67.25 and Rs67.50 on further improvement in dollar supplies.
The rupee firmness over the American currency persisted on May 30 as the rupee recovered 35 paisa in relation to the dollar on the buying counter and another 50 paisa on the selling counter, changing hands versus the dollar at Rs66.90 and
Rs67. According to currency analysts, the rupee which touched new lows at Rs69.60 and Rs69.90 on May 20 2008, has now recovered nearly four percent after several measures taken by the State Bank of Pakistan in the past two weeks. In the entire week that ended on May 30, the rupee managed to gain 100 paisa over the dollar in the inter bank market.
In the open market the rupee/dollar parity showed a fluctuating trend this week. The rupee staged a sharp recovery against the dollar on the first trading day of the week in review, gaining 30 paisa and trading at Rs69.00 and Rs69.10 on May 26 after closing last week at Rs69.30 and Rs69.40. However, the recovery in the rupee/dollar parity was short lived as the rupee failed to maintain its overnight firmness versus the dollar on the second trading day, when it lost ten paisa to trade at Rs69.10 and Rs69.20 on May 27.
On May 28, the rupee again repelled its overnight weakness and recovered 20 paisa against the dollar, which was changing hands at Rs68.90 and Rs69. On the following day the parity remained firm with the rupee recovering another 50 paisa to trade at Rs68.40 and Rs68.50 on May 29. On May 30, the rupee maintained a firm outlook, strengthening by 40 paisa in terms of the dollar and trading at Rs68 and Rs68.10. This week, the rupee in the open market, gained Rs1.30 against the American dollar.
Versus the European single common currency, the rupee gained 80 paisa on the opening day of the week in review changing hands at Rs108.25 and Rs108.35 on May 26 against previous week close of Rs109.05 and Rs109.15. But on the following day the rupee lost 25 paisa and traded at Rs108.50 and Rs108.60. On May 28, the rupee regained firmness versus the euro by recovering five paisa to trade at Rs108.45 and Rs108.55.
It continued to strengthen against the euro on May 29, when it made a sharp gain of Rs3.25 in single day trading, changing hands at Rs105.20 and Rs105.30 as the US currency managed to show it’s gains in the world market. The rupee, however, failed to retain its firmness against the euro, losing 60 paisa to trade at Rs105.80 and Rs105.90 on the fifth day of trading in review. During the entire week, the rupee managed to recover Rs2.45 against the European single common currency, amid sharp fluctuations.
On the international front, there was long holiday weekend in the United States and Britain May 26 as US and UK financial markets were closed for national holidays. In Tokyo the dollar steadied near one-month lows against a basket of major currencies on the week’s opening day after falling late last week on concerns that surging oil prices could further slow the US economy and add to inflation pressures.
The dollar continues to stay on a downward trend with many players just looking for a chance to sell it. The euro was at $1.5759, flat from late US trading on last week close. It hit all-time highs above $1.60 last month. The dollar steadied against the Japanese currency at 103.30 yen after a fall in Tokyo stocks prompted investors to unwind risky carry trades, pushing it to the day’s low of 103.13 yen on trading platform EBS.
On May 27, the dollar rose broadly after oil prices fell and a report showed an unexpected rise in US new home sales in April, boosting expectations the economic slowdown is not as bad as feared. The euro slipped in New York after a report showed US sales of newly constructed single-family homes rose 3.3 per cent in April. In late trading, it was down 0.6 per cent at $1.5683. The dollar appears to be looking at oil prices right now. The dollar rose against the Canadian dollar for a fourth day as oil prices declined. US dollar/Canadian dollar last traded up 0.2 per cent at 0.9929. The greenback also rose against sterling, pushing the British currency down nearly 0.3 per cent to $1.9762.
On May 28, the dollar rose broadly as a better-than-expected report on US durable goods orders for April bolstered the view the Federal Reserve may keep interest rates on hold or even raise them by year-end. Demand for the greenback also rose after reports showed rising German inflation and oil prices eased from recent record highs. In late trading in New York, the euro was last down 0.2 per cent at $1.5646. The dollar also rallied 0.3 per cent against a basket of six currencies.
The dollar earlier traded at a two-week high against the yen at 105.32, but it pared some of its gains and was last up 0.4 per cent at 104.68. “People are still inclined to buy the dollar after we broke above 104.90 resistance in dollar-yen and below euro-dollar short-term support around 1.5640. Sterling was up 0.2 per cent at $1.9810, after rising as high as $1.9819 and approaching a three-week high around $1.9850 touched late last week. The dollar was under broad selling pressure after the ABC/Washington Post Consumer Comfort Index showed that sentiment hit a record low last week, while monthly measure of sentiment slumped to a 16-year low.
On May 29, the dollar rallied in New York trade, rising to a three-month high against the yen, on data showing the US economy grew in the first quarter faster than previously estimated and as hawkish Federal Reserve comments boosted expectations for an interest rate increase this year. The euro was trading 0.8 per cent lower at $1.5506, the lowest in little over a week. The dollar last traded 0.9 percent higher against the yen at 105.55 retreating from a three-month high of 105.87. Sterling traded 0.2 percent lower at $1.9760, after falling more than half a percent to $1.9674, its lowest level in a week.
At the close of the week on May 30, the dollar steadied in Tokyo, hovering near a three-month high against the yen after an upward revision to US economic growth figures underscored expectations for the Federal Reserve to raise interest rates this year. It rose as high as 105.73 yen before slipping back. The euro was steady at $1.5525. Technical signals will turn bullish for the dollar if it manages to rise above 106 yen and stay there, said a trader for a major Japanese bank. In that case, the dollar could rise towards 108 yen and then 110 yen. Sterling stood at $1.9762, up from the day’s low of $1.973.