THE RUPEE: sharp losses

The rupee tumbled and suffered sharp losses against dollar on both the open and the interbank markets during the week ended on May 30, 2009. On the interbank market, the rupee lost 75 paisa versus dollar for buying and selling at 81.15 and 81.20 respectively. On the open market, the rupee lost 30 paisa against dollar for buying and selling at 80.90 and 81.10, respectively.
In terms of euro, the rupee was down by Rs 2.00 for buying and selling at 113.50 and Rs 114.50.
Strong demand for dollars pushed the rupee down sharply. Through the month of May, the rupee touched the low level at 81.00 due to dollar buying by importers to clear payments. It would be interesting to note how the rupee would perform versus dollar amid final month of the current fiscal year 2008-09!
However, increased supply of dollars helped the rupee to some extent to resist sharp losses. Otherwise, it could go down more deeply if dollars' supply had not improved.
According to State Bank of Pakistan's (SBP) weekly data, the country's foreign exchange reserves rose by 53 million dollars to 11.19 billion dollars. Widening trade deficit did not let the foreign exchange reserves go high.
INTER-BANK MARKET RATES: On Monday, the rupee shed one paisa against dollar for buying at 80.40 and two paisa for selling at 80.45.
On Tuesday, the rupee lost 15 paisa against dollar for buying and selling at 80.55 and 80.60. On Wednesday, the rupee-dollar parity was unchanged for buying and selling at 80.55 and 80.60.
On Thursday, the rupee gave up 33 paisa against dollar for buying at 80.88 and 32 for selling at 80.92.
On Friday, the rupee lost 12 paisa against dollar for buying at 81.00 and 13 paisa for selling at 81.05 due to excessive demand by importers. On Saturday, the rupee lost 15 paisa against dollar for buying and selling at 81.15 and 81.20.
OVERSEAS OUTLOOK FOR DOLLAR: In the first Asian trade yen fell broadly following news that North Korea conducted a nuclear test and a report that it had fired a short-range missile, with traders saying its fall was exaggerated by position unwinding.
The yen showed little initial reaction to news that North Korea had conducted a nuclear test on Monday, but yen selling later gained steam after South Korea's Yonhap news said North Korea had fired a short-range missile.
In the second Asian trade, the dollar rose from a five-month low against a basket of currencies as investors booked profits on a spike in the euro and other higher-yielding currencies, while traders awaited US Treasury auctions to test the strength of investor appetite for dollar assets.
The euro slid against the dollar and the yen after Britain's Daily Telegraph reported that Germany's financial regulator BaFin had warned that toxic debt of the country's banks would blow up "like a grenade" unless they took advantage of government bad-bank plans to prepare for the next phase of crisis.
In the third Asian trade, the yen fell as an improvement in US consumer confidence reinvigorated investor interest in betting on riskier assets, including currencies seen likely to benefit quickest from economic improvement.
Sterling climbed to a six-month high against the yen and neared $1.60, while the dollar also gained against the Japanese currency, as did the euro and Australian dollar.
In the fourth Asian trade, the yen tumbled across the board, hurt by talk of Japanese retail demand for overseas assets, while the dollar rose 1 percent against the Japanese currency, aided in part by Moody's affirming its top credit rating for the United States.
The dollar jumped to its highest in more than a week against the yen and edged up against a basket of currencies, building on gains made on Wednesday after the second of three large US Treasury auctions this week drew solid investor demand.
In the final Asian trade, the dollar fell towards a five-month low against a basket of major currencies on Friday as signs the global recession may have passed its worst and concern about ballooning US government debt prompted investors to sell the safe-haven currency.
The dollar was under pressure again a day after strong US durable goods data reduced the need for investors to hold the world's most liquid currency.
At the week-end, in the New York, the dollar hit a five-month low against a basket of major currencies on Friday and the euro rose above $1.41 for the first time this year as investors bought higher-yielding currencies and assets on hopes of a global economic recovery.
For the coming week, after a brutal sell-off in May, the dollar looks vulnerable with the start of June as recovery hopes and lingering worries about the growing US deficit prompt investors to move away from the greenback.
The dollar fell to a five-month low on Friday and was on track for a monthly drop of more than 6 percent versus a basket of currencies, its biggest decline since 1985.
A full slate of US economic data next week, which will be highlighted by Friday's jobs report for May, is expected to reinforce market views that the worst of the global downturn may be past, analysts said.
OPEN MARKET RATES: On May 25, the rupee was steady in relation to dollar for buying and selling at 80.60 and 80.80. The rupee gained 35 paisa in terms of euro for buying at Rs 111.50 and posted fresh gain of 50 paisa for selling at Rs 112.50.
On May, 26, the rupee shed 10 paisa in terms of dollar for buying and selling at 80.70 and 80.90. The rupee lost 30 apisa versus euro for buying at Rs 111.80 and 20 paisa for selling at Rs 112.70. On May 27, the rupee shed five paisa in terms of dollar for buying at 80.75 while it did not show any change for selling at 80.90.
The rupee, however, gained 10 paisa against euro for buying at Rs 111.70 while it did move to any side for selling at Rs 112.70. On May 28, the rupee held on to its overnight level against dollar for buying at 80.75 while it shed 5 paisa for selling at 80.95. The rupee gaining 70 paisa versus euro for buying and selling at Rs 111.00 and Rs 112.00.
On May 29, the rupee lost 15 paisa against dollar for buying and selling at 80.90 and 81.10. The rupee lost Re one against euro for buying and selling at Rs 112.00 and Rs 113.00. On May 30, the rupee maintained its overnight levels in terms of dollar for buying and selling at 80.90 and 81.10. The rupee fell sharply in relation to the euro, losing Rs 1.50 for buying and selling at Rs 113.50 and Rs 114.50.