Bullish sentiment prevailed in the currency market as the rupee managed to hold firmness against the dollar during the week ended on April 14,2007. The rupee was sharply up in the interbank market, picking up nine paisa in terms of the dollar for buying and selling at 60.66 and 60.67, respectively.
In the open market, the rupee was higher by two paisa in relation to the dollar for buying and selling at 60.70 and 60.80, moneychangers said. The feature of the week was the rupee's steep fall versus the euro, losing Rs 1.10 for buying and selling at Rs 81.81 and Rs 81.91, they said.
After touching the two-year high against the dollar in the Japanese markets, the single European currency heading to cross the barrier of Rs 82 in the open market.
The rupee was able to retain its firmness against the dollar on the back of strong supplies of the US currency, money experts said. In the meantime, at a time the rupee touched the new low at 60.88 as importers rushed for dollars to meet the import bills, they said.
Due to higher payments in the middle of the week, the banks bought approximately 200 million dollars in a single day and it is expected that if the dollars supply improve, the rupee may be able to hold present levels.
As a result of rising demand for dollars, the country's foreign exchange reserves fell to 13.577 billion dollars on April 7, 2007, they said.
On March 31, 2007, the foreign exchange reserves touched the all-time of 13.625 billion dollars, the reserves improved on the back of Foreign Direct Investment (FDI) and rising inflows of remittances by the overseas Pakistanis, they observed.
Usually, it came under observation that when dollar goes up, the exporters adopted the cautious attitude and kept themselves away from the markets to analyse the circumstances. When dollar reaches at the highest level, they started selling dollars to fetch better profit, they said.
Some money experts attributed the rise in the dollar's value to asking demand by importers, who usually made heavy payments for import bills.
Higher cost of input made the Pak goods less attractive for the foreign buyers, they (buyers) preferring to buy Chinese and Indian product due to cheaper and quality wise better. Imports of high machinery to improve exports, is appearing as not meeting the desirable purpose, instead, the payments were touching the new high.
Is it a good sign in the country's economy? Is the economy on track, despite all efforts we are not achieving the desirable targets. The exports target was 18 billion dollars for the current fiscal year (2006-07), during the nine months, country fetched 12.435 billion dollars, can we get the remaining six billion dollars?
Similarly, the imports were depicting sharp rise at 22.420 billion dollars till, April of the year, against the last year figure of 20.688 billion dollars and may touch 30 billion dollars till the end of fiscal year, they said.
Apparently, this factor is dragging the economy despite the higher trend in the reserves in shape of remittance and Foreign Direct Investment (FDI), money experts said.
Basically, the higher trend in the imports was increasing the country's trade deficit. In the meantime, the rupee's fall was at certain level due to sufficient supply of dollars, they added.
The foreign exchange reserves have crossed the 13, 624.9 million dollars mark in the first week of the April, 2007.
High payments with the beginning of the final quarter of the current fiscal year, built pressure over the rupee slightly, they said.
INTER-BANK MARKET RATES: On April nine, the rupee maintained firm outlook against the dollar for buying and selling at 60.75 and 60.76, they said. On April 10, the rupee lost four paisa in relation to the dollar for buying and selling at 60.79 and 60.80, respectively.
On April 11, the rupee came under pressure in late hours, touching the new high at 60.88, they said. On April 12, the rupee was up against the dollar, gaining three paisa for buying and selling at 60.77 and 60.79, respectively.
On April 13, the rupee rose by 10 paisa in a single day rally against the dollar for buying and selling at 60.67 and 60.68, moneychangers said.
On April 14, the rupee mainly held its overnight levels against the dollar for buying and selling at 60.66 and 60.67, dealers said.
GLOBAL MARKET TREND: In the first session of the week, the dollar held its broad gains, staying near a fresh six-week high against the yen hit after Friday's robust US jobs report.
In the second session, the dollar gave up its early gains, came under pressure broadly and dipped from a six-week high against the yen on Tuesday, as investors took profits ahead of a meeting of Group of Seven (G-7) finance officials later in the week.
The G7 officials in the past have said yen weakness runs counter to Japan's economic recovery and warned investors they could be burned making such one-way currency bets.
The strong March jobs report eased concern about the weakening US housing market and signs of softness in US manufacturing, reinforcing the view that the Federal Reserve will not cut interest rates in the near term. In the middle of the week, the dollar faced some setback after the single European currency rise, dealers said.
According to the Reuters, the euro eased from a record high against the yen on profit-taking but remained firm on expectations for rising euro zone interest rates while weak data reinforced views the Bank of Japan will not be in a hurry to raise rates.
The euro rose as high as 160.16 yen, its highest since the single currency's launch in 1999 after Japan's core machinery orders fell more than expected in February from the previous month and cast some doubt on the outlook for capital spending.
The euro hovered near an all-time high against the yen and a two-year peak against the dollar as market players awaited clues from the European Central Bank (ECB) on whether interest rates will be lifted further.
The ECB officials will meet shortly and it is widely expected to keep rates on hold at 3.75 percent, but investors are looking for ECB President Jean-Claude Trichet to give some signal that rates will rise to 4.0 percent by June or possibly as soon as next month.
The single European currency continued its firmness in the Asian markets, climbed to a fresh two-year high against the dollar after the European Central Bank (ECB) signalled that it is likely to boost interest rates in June and beyond to prevent an acceleration of inflation.
The euro rose to 1.3519 dollars on electronic trading platform EBS, hitting its highest level since January 2005. It was up from around 1.3482 dollars in late US trading on Thursday.
At the weekend, in the NY markets, the dollar briefly hit a fresh two-year low against the euro after a survey suggested US consumers were growing more pessimistic about the economy.
PEN MARKET RATES: On Monday, the rupee extended its weekend slide against the dollar for buying and selling at 60.72 and 60.82, dealers said.
The rupee managed to gain seven paisa versus the euro for buying and selling at Rs 80.71 and Rs 80.81 in process of trading, dealers said.
On Tuesday, stable trend was seen as the rupee retained its overnight levels against the dollar for buying and selling at 60.72 and 60.82, dealers said.
The rupee posted fresh gain of 40 paisa against the euro for buying and selling at Rs 81.11 and Rs 81.21, they said. The single currency gained sharply on the back of dollar's fall in the world markets, they said.
On Wednesday, the rupee shed three paisa against the dollar for buying and selling at 60.75 and 60.85, dealers said. The rupee followed same print, losing four paisa for buying and selling at Rs 81.15 and Rs 81.25, they said.
On Thursday, the rupee failed to match with the rising demand for dollars, shedding two paisa in relation to the US currency for buying and selling at 60.77 and 60.87, dealers said.
Better expectations kept the euro into the plus column, picking up more 29 paisa for buying and selling at Rs 81.44 and Rs 81.54, they said. On Friday, it improved with an increase of two paisa for buying at Rs 60.80 and it also posted fresh gain of three paisa for selling at 60.90,
On Saturday, the rupee posted fresh gain of 10 paisa in relation to the dollar for buying and selling at 60.70 and 60.80, dealers said.
The rupee, however, continued its slide in relation to the euro for buying and selling at Rs 81.81 and Rs 81.91, they said. It gained 20 paisa against the euro for buying and selling at Rs 81.69 and Rs 81.79 versus the rupee, they said.
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