The peaceful election process helped the rupee back on its track after recovering sharply against the dollar in both the interbank and open market during the week ended February 23, 2008.
Under the hovering uncertainties, the whole nation feared the rigging and violence during the Election - 2008, but thank God the process has passed in a peaceful manner.
In the interbank market, the rupee picked up 88 paisa in relation to the dollar for buying and selling at 61.98 and 62.01. The rupee recovered sharply against the greenback for buying and selling at 62.20 and 62.30. It followed the same print and rose by 50 paisa for buying and selling at Rs 92.25 and Rs 92.35.
The rupee started recovering its gain versus the dollar on improvement in the inflows as a result of remittances and in shape of foreign direct investment (FDI).
Unexpected positive developments were seen in the currency market as the money markets welcomed the election results with the visible recovery in the rupee's value.
During the post-election session, the rupee came under pressure in both the interbank and open market due to excessive dollar buying by the importers. Negotiations are under process between the two leading winners for making the new government.
Other encouraging thing was the country's major indicator the Karachi Stock Exchange (KSE) is keeping bullish sentiment. The KSE 100-index reached all-time high level after crossing 15,000 points barrier by gaining 200 points on Thursday. This is the first time in country's history that KSE 100-Index has crossed the barrier of 15,000.
According to the State Bank of Pakistan (SBP), the foreign exchange reserves fell by 470 million dollars to 14.08 billion dollars in the week ended February 16.
"The fall in reserves during the period was due to higher payments for oil and commodity imports as well as for debt payments," said SBP spokesman Syed Wasimuddin.
The foreign reserves hit an all-time high of 16.49 billion dollars on October 31, 2007, but fell because of outflows from the stock market after President Pervez Musharraf imposed emergency rule on November 3.
The emergency was lifted on December 15, but analysts said foreign investors remained cautious about politics after the assassination of opposition leader Benazir Bhutto on December 27. However, after a peaceful election last week, foreign exchange inflows are expected to rise again, they viewed.
INTER-BANK MARKET RATES: On February 18, the banks were closed on account of Election - 2008. On February 19, the rupee recovered 15 paisa against the dollar amid post-election session for buying and selling at 62.96 and 62.98, money experts said.
On February 20, the rupee gained 64 paisa in relation to the dollar for buying and selling at 62.32 and 62.40, respectively. On February 21, the rupee recovered more 47 paisa against the dollar for buying and selling at 61.85 and 61.90, currency experts said.
On February 22, the rupee was lower by five paisa against the dollar for buying at 61.90 and it also shed two paisa for selling at 61.92 in process of strong demand for dollar by the importers.
On February 23, the rupee fell by nine paisa against the dollar for buying and selling 61.98 and 62.01, dealers said.
DOLLAR'S VALUE VS MAJOR CURRENCIES: Against the last week, the dollar also struggled hard to come out of the falling trend. In the first session, the dollar steadied against the yen and the euro as many investors stayed on the sidelines ahead of US data this week waiting for further clues on the health of the economy.
The dollar slid late last week when US reports revived fears that the economy was slipping into a recession, but sentiment was improving slightly after a drop in Wall Street share prices on Friday was relatively limited, traders said.
During the second session in Asia, the dollar held its steadier trend against the yen and the euro, with investors eyeing high-yielding currencies for a gauge of risk appetite and market direction.
Recovering share prices and signs of credit markets stabilising have encouraged some investors to return to carry trades, where they borrow the low-yielding yen to fund purchases of higher-yielding currencies and assets.
In the third session of Asian trade, the dollar, recovering from a slide as traders brushed off a jump in oil prices to record highs above 100 dollars as it had limited impact on regional stock markets.
US crude traded around $99.33 a barrel, pulling away from a record high of $100.10 hit in the previous session on expectations that Opec may not raise output to ease already exorbitant prices.
In the forth Asian session, the dollar was little changed against the yen and the euro, stung by expectations the Federal Reserve will keep slashing interest rates to prevent the US economy from suffering a sharper downturn. In its quarterly forecast, the Fed cut its economic growth forecast for 2008 due to the deepening housing slump and tight credit, saying the risks of further setbacks were worrisome.
In the Asian markets, the dollar was stuck near two-week lows versus the euro during the fifth and final session of the week after data showing the weakest regional factory activity since the last US recession in 2001 boosted expectations for a large Federal Reserve interest rate cut.
Many market players expect the Fed to slash overnight rates by another 50 basis points at its next meeting in March to 2.50 percent, following an unusually aggressive 125 basis points of cuts in January to help fend off a recession.
In the New York market, at the weekend, the dollar fell, hitting a three-week low against the euro, amid mounting fears of a US recession and more credit-related losses.
But a CNBC television report that a bailout for bond insurer Ambac Financial Group was imminent saw US stocks stage a late rally, helping the greenback fight back from earlier troughs against the yen.
OPEN MARKET RATES: On Monday, all the trading centres were closed for the general election 2008. On Tuesday, the rupee followed he same trend as it managed to gain five paisa against the dollar for buying and selling at 63.25 and 63.35, dealers said. Versus the euro, the rupee also gained five paisa for buying at Rs 92.75 and it picked up 15 for selling at Rs 92.85, they said.
On Wednesday, the rupee maintained upward trend against the dollar, picking up 10 paisa for buying and selling at 63.15 and 63.25, dealers said. The rupee also gained the same amount in terms of the euro for buying and selling at 92.65 and 92.75, they said.
On Thursday, the rupee picked up 1.30 against the dollar for buying and selling at 61.85 and 62.00 in process of trading, they said. The rupee appreciated sharply against the euro for buying and selling at 90.75 and 90.85, they said.
On Friday, the rupee also depreciated against the US currency in the open market, dropping 25 paisa for buying and selling at 62.10 and 62.20, they said. The rupee also fell sharply against the euro for buying and selling at 91.55 and 91.65, they said.
On Saturday, the rupee also extended its fall against the dollar, shedding more 10 paisa for buying and selling at 62.20 and 62.30, they said. The euro is expanding its ground against the rupee, picking up 70 paisa for buying and selling at 92.25 and 92.35, they said.