THE RUPEE: strong demand for dollar keeps local currency under pressure

Strong demand for dollars kept the rupee under pressure last week, experts said.
In the open market, the rupee shed 10 paisa versus dollar for buying and selling at Rs 58.70 and Rs 58.75, dealers said. In relation to euro, the rupee lost 55 paisa for buying and selling at Rs 70.65 and Rs 70.95.
The dollar was quoted at Rs 58.45 and Rs 58.46 on the buying and selling counters and market pundits were predicting that dollar might touch the new high at Rs 58.55 this week.
They said that banks' dollars selling to ease pressure on the rupee made no difference to its health in the open market. In addition, they said that sometimes exporters' selling came in but it was short-lived support for the rupee on asking demand for dollars.
In fact, importers' excessive dollars buying for oil payments wiped out all gains, analysts said. They said that oil payments were higher due to rising trend in world markets.
Analysts said that rising trend in oil prices globally was causing concern. The local currency was in the grip of increasing worries about balance of payments (BoP) jolting as a result of record breaking oil price levels in world markets.
At the weekend, oil prices touched the new high not because of Organisation of Petroleum Exporting Countries (Opec's) decision to cut production but owing to rising worries about financial turmoil at Russia's largest oil company which might cut oil production. Sharp rise in oil prices and its tremors were felt in Pakistan like other oil importing countries, they noted.
The country's monetary team had adopted the strategy to reduce oil import bill. But analysts were of the view that they must intensify efforts with new technologies to achieve the purpose. They were expecting that country's policy to rely more on indigenous fuel resources would help bring down dependence on oil imports.
Since the beginning of new fiscal year, the rupee has lost about 50 paisa versus dollar in the open market and 65 paisa in interbank market due to short supply of US currency, they noted.
Demand for dollars is so strong that even small investors were not selling dollars on expectation of better return in the coming days.
If the rupee continued its fall, the greenback might touch Rs 58.50 mark in the interbank and Rs 59 mark in the open market, analysts said.
They said that due to high import payments this year the government expects a 3.0 billion dollars trade deficit for 2004-05.
INTERBANK MARKET RATE: On Monday, increased importers' rush for dollars pulled the rupee down in the interbank market to face 10 paisa erosion in a single day at Rs 58.46 and Rs 58.48, money dealers said.
Continued demand for dollars by importers pushed the rate lowest since December 2002, compared with Rs 58.36 and Rs 58.38 weekend's rate as the government had to pay approximately 30 million dollars the following day.
On Tuesday, the rupee recovered 14 paisa versus dollar for buying and selling at Rs 58.32 and Rs 58.34, dealers said.
On Wednesday, the rupee's sharp recovery in the interbank market proved short-lived as it lost three paisa versus dollar for buying and selling at Rs 58.36 and Rs 58.38, respectively.
On Thursday, the rupee firmed up and did not show major difference in its overnight levels on the buying and selling counters at Rs 58.37 and Rs 58.39, market men said.
On Friday, strong demand for dollars kept the rupee under pressure, losing three paisa for buying and selling at Rs 58.39 and Rs 59.42, dealers said.
At the weekend, the rupee lost six paisa versus greenback for buying and selling at Rs 58.45 and Rs 58.46.
OPEN MARKET RATES: On July 27, the rupee shed five paisa against dollar for buying and selling at Rs 58.60 and Rs 58.65, dealers said.
The local currency also came under pressure versus euro and lost 50 paisa for buying and selling at Rs 71.20 and Rs 71.50 on rising demand in the international markets, they added.
On July 28, the rupee did not show any change versus dollar for buying and selling at Rs 58.60 and Rs 58.65, respectively.
It, however, lost 15 paisa versus euro for buying and selling at Rs 71.35 and Rs 71.65, respectively.
On July 29, the rupee maintained its overnight levels versus dollar for buying and selling at Rs 58.60 and Rs 58.65, respectively.
On July 30, the rupee shed five paisa versus dollar for buying and selling at Rs 58.70 and Rs 58.75, market men said.
The rupee was unchanged versus single European currency for the second day in a row on euro's drifting position in world markets, dealers said.
On July 31, the rupee maintained its overnight levels for buying and selling rates. The rupee gained 25 paisa versus euro for buying and selling at Rs 70.65 and Rs 70.95.