TTHE RUPE: slight decline

The rupee managed to resist sharp decline against dollar on the currency market during the week ended on April 2, 2011. On the interbank market, the rupee shed five paisa in relation to dollar for buying and selling at 85.40 and 85.45.
On the open market, the rupee did not show any change versus dollar for buying at 85.15 while it slipped by five paisa for selling at 85.35. The rupee fell sharply lost Rs 1.09 in terms of euro for buying and selling at Rs 120.54 and Rs 121.04.
The rupee resisted steep fall versus the dollar due to easy supply of US currency. Since the State Bank of Pakistan (SPB) has lifted a three-year ban on forward cover facility for importers, it was expected that the rupee would lose its value versus the greenback but increase fair supply of dollars did not allow the rupee to look down.
Surprisingly, in spite of forward buying of dollars by importers, the rupee managed to recover modestly versus the US currency.
The major factors behind the rupee's firmness were rising trend in remittances, export receipts and loans for rehabilitation of flood victims.
In the near future, it is expected that these factors may boost the forex reserves and the rupee value as well.
In the meantime, it is also likely that the rupee may shed its gains if buying of dollars increased by importers to meet oil payments. After the rise in the oil prices in the world market, the government increased oil prices by 13 percent.
Demand dollars was strong due to forward purchasing by importers. Last week, the State Bank of Pakistan (SBP) said that it has waived the restrictions over forward buying of dollars due to persistent stability in the country's foreign exchange reserves.
According to the State Bank of Pakistan (SBP) weekly statement, the country's foreign exchange reserves rose to 17.95 billion dollars in the week ending on March 26, from 17.50 billion dollars of previous week.
INTER-BANK MARKET RATES: On Monday, the rupee inched up after gaining two paisa versus dollar for buying and selling at 85.33 and 85.38.
On Tuesday, the rupee gained five paisa versus dollar for buying and selling at 85.28 and 85.32.
On Wednesday, the rupee gained four paisa for buying at 85.24 against dollar and three paisa for selling at 85.29.
On Thursday, the rupee shed eight paisa for buying and selling at 85.32 and 85.37.
On Friday, the rupee was unmoved versus dollar for buying at 85.32 while it gained three paisa for selling at 85.34. On Saturday, the rupee shed eight paisa in relation to dollar for buying at 85.40 and 11 paisa for selling 85.45.
OVERSEAS OUTLOOK FOR DOLLARS: In the first Asian trade, the euro dipped after German Chancellor Angela Merkel's conservatives lost a key state election and it could pull back towards $1.39 in the near-term, with the dollar supported after hawkish comments from some Fed officials.
Failure to break through option barriers around $1.4250 last week also saw some traders pare long exposure to the common currency, although support around $1.4015/35 appeared to be holding for the time being.
Interbank buy/sell rates for taka against dollar were 72.70/72.72 (previous 72.67/72.70); and Call Money Rates: 6.00-8.00 percent (previous 6.25-12.00 percent).
The yuan closed lower against dollar after the People's Bank of China fixed its daily mid-point slightly weaker to reflect a rise in dollar index over the weekend.
Despite the pullback, dealers expected the yuan to continue its recent rises, possibly appreciating 5 to 6 percent in 2011, partly because China appeared to be using the currency as a tool to help tame inflation.
In the second Asian trade, the euro rose against dollar after comments by the head of the European Central Bank the previous day reinforced expectations for higher interest rates, while the yen held steady with the focus on Japan's nuclear crisis.
ECB President Jean-Claude Trichet had said on Monday that inflation in the euro zone was "durably" above the ECB's target, cementing expectations that the bank would raise interest rates in April.
His comments also helped relieve pressure on the single currency from the euro zone debt crisis, with concerns rising about Portugal's ability to finance itself.
The yuan closed a touch higher against dollar on Tuesday after the People's Bank of China fixed its daily mid-point marginally weaker, in a move which, traders said, signalled that the central bank wants a temporary pause in yuan's recent strength.
Indian rupee closed stronger on local share gains and dollar inflows from corporate borrowings ahead of the fiscal year-end on Thursday, but oil import payments capped the uptick.
Indian rupee ended at 44.78/79 per dollar, 0.1 percent stronger than its 44.83/84 close on Monday. It traded in a range of 44.6650-44.8250 intraday. Interbank buy/sell rates for taka against dollar were 72.71/72.75 (previous 72.70/72.72), and Call Money Rates: 3.00-6.00 percent (previous 5.00-10.00 percent).
In the third Asian trade, the yen fell broadly, hitting 10-month lows against euro and touching its lowest level in nearly three weeks versus dollar as interest rate differentials widened in favour of US and European currencies.
Hawkish comments by Federal Reserve and European Central Bank officials contrasted with the stance taken by Bank of Japan, which is set to leave interest rates near zero for some time to support the world's third largest economy as it recovers from the effects of the March 11 earthquake.
The yuan closed up against dollar and approached its record trading high on Wednesday after the People's Bank of China fixed its daily mid-point near an all-time high.
The PBOC has fixed a slew of record high mid-points since the start of this year, indicating that the government may be allowing the yuan's exchange rate to appreciate to help fight inflation, partly propelled by high global commodity prices.
In the fourth Asian trade, the yen hit a fresh 10-month low versus euro and touched a three-week trough against dollar as expectations mounted that Japan would lag the euro zone and US central banks in raising interest rates.
The dollar's advance slowed into the Asian afternoon with the March 11 high of 83.30 yen proving tough resistance, while selling by Japanese banks and foreign players along with some fiscal year-end yen demand from Japanese exporters pushing the pair close to the 100-day moving average around 82.60.
The yen was unable to recover strongly, however, as hawkish comments by euro zone and US central bank officials reinforced the view that the global economic recovery is on track, bolstering risk-friendly sentiment at the end of a volatile quarter.
Indian rupee was trading at Rs 44.75 versus dollar, Malaysian ringgit at 3.0250, and Chinese yuan was available at 6.5562 for dollar.
Interbank buy/sell rates for taka against dollar were 72.75/72.80 (previous 72.75/72.80), and Call Money Rates 4.00-6.00 percent (previous 3.50-8.00 percent).
In the final session of Asia, the yen slid to a 10-month low against euro and fell below its 200-day moving average versus dollar, poised for more weakness as widening yield differences increased the appeal of using the yen to fund investments in other currencies.
The yen came under renewed pressure after comments from a US Federal Reserve official and gave traders more reason to think that the Fed will raise interest rates before the Bank of Japan, underscoring the diverging outlook for their monetary policies.
The yuan closed up against dollar, hitting a record high in intraday trading, after the People's Bank of China fixed its daily mid-point at an all-time high for the second day in the latest sign that the government may be using the currency to help fight inflation.
Indian rupee was trading at Rs 44.59 versus dollar, and Malaysian ringgit at 3.0250.
At the weekend, the addition of more than 200,000 US jobs wasn't enough to boost dollar against euro on Friday, and the greenback may have more losses in store as markets brace for a euro zone interest rate hike next week.
The employment report, which also showed the US jobless rate slipping to 8.8 percent last month, did push the dollar above 84 yen, its highest in more than six months, as traders expect Japanese interest rates to stay at a record low.
New York Federal Reserve President William Dudley upended a dollar rally against euro, though, when he said he saw no reason to adjust the central bank's loose monetary policy despite the encouraging jobs data.
OPEN MARKET RATES: On March 28, the rupee shed 10 paisa in relation to dollar for buying and selling at 85.25 and 85.40. The rupee also lost 14 paisa in terms of euro for buying and selling at Rs 119.59 and Rs 120.09.
On 29 March, the rupee was up by five paisa in relation to dollar for buying at 85.20 while it did not show any change for selling at 85.40. The rupee continued its decline versus euro for buying and selling at Rs 120.13 and Rs 120.63.
On 30 March, the rupee recovered five paisa in relation to dollar for buying and selling at 85.15 and 85.35.
The rupee also gained 45 versus euro for buying and selling at Rs 119.68 and Rs 120.18.
On 31 March, the rupee shed five paisa in relation to dollar for buying at 85.20 while it did show any change for selling at 85.35. The rupee also dropped sharply against euro, losing Rs 1.19 for buying and selling at Rs 120.87 and Rs 121.37.
On April 1, the rupee recovered its loss against dollar, gaining five paisa for buying at 85.15 while it did not show any change for selling at 85.35. The rupee, however, recovered 60 paisa in relation to euro for buying and selling at Rs 120.27 and Rs 120.77.
On April 2, the rupee maintained its overnight value against dollar for buying and selling at 85.15 and 85.35, while it failed to retain its overnight firmness versus euro for buying and selling at Rs 120.54 and Rs 121.04.