Uncertain business in currency market was seen due to panic buying of dollars and the rupee touched the low at 67 for a dollar, but timely move by the State Bank of Pakistan (SBP) helped the Pakistan currency to minimise its losses during the week ended on April 26, 2008.
In the interbank market, the rupee lost 17 paisa against dollar for buying at 64.18 and 10 paisa for selling at 64.20. In the open market, the rupee lost 35 paisa in terms of dollar for buying and selling at 64.85 and 64.95, while it lost 45 paisa against euro for buying at Rs 102.50 and 50 paisa for selling at Rs 102.65.
The rupee commenced the week on a stable note in both open and interbank markets but in the middle of week unpredictable conditions prevailed in the currency market owing to forward buying of dollars by importers. The dollar, which is also in poor condition, failed to come out of the prolonged weakness versus major currencies on the world markets, but got stronger in terms of rupee mainly because of its higher demand to meet the oil payments.
The State Bank of Pakistan (SBP) more than once intervened in the market to pull back the rupee from bottom. The dominating factors behind the rupee's slide were soaring prices of oil on the global market and its effect on the prices of others goods, commodities and services, uncertain political condition in the country, which may cause drying up foreign investment and outflows from the country.
Rising trend in imports and falling in textile exports were widening the trade deficit and pulling down the balance of payments (BoP). During the last couple sessions, profit-taking was seen on the currency market as the rupee started coming up versus the dollar. The State Bank of Pakistan (SBP) took necessary measures to bring the rupee back on track.
On Friday, the Bank called an emergency meeting with representatives of moneychangers to seek the chances for keeping the rupee firm and to ward off the speculative buying of dollars. Additionally, Malik Bostan, president of the Forex Association of Pakistan (FAP) said that it assured them (moneychangers) that each one of the licensed foreign exchange companies has to take minimum of 250,000 dollars to meet the shortage of dollars on the open market. If any panic buying of dollars would be seen in the market, the Bank would provide dollars to the moneychangers to bring the rupee at a certain level. As a result of this move the rupee started moving up with significant rise in terms of dollar and it was expected to maintain its present levels in the near term.
Furthermore, he said, it was very important that to keep the speculators far from the market, the central bank should keep a watch over the currency movement to prevent crisis-like situation in the currency market.
The SBP provided 250,000 dollars to the moneychangers on Saturday, which brought the dollar rate down, and if the demand for dollars would increase in the market in the coming days, the bank would provide the same amount, he added.
On the instruction of the SBP, to meet the demand for dollars in the currency market, all commercial banks would provide to the exchange companies (A category) US dollar cash note against US dollar Telegraphic Transfers (TT dollars) or home remittances.
INTER-BANK MARKET: On Monday, the rupee-dollar official parity rates held the week-end level at 64.05 and 64.10.
On Tuesday, the rupee gained six paisa against dollar for buying at 63.99 and rose by eight paisa for selling at 64.02.
On Wednesday, the rupee lost 28 paisa against dollar for buying at 64.27 and 30 paisa for selling at 64.32. On Thursday, the rupee lost 28 paisa versus dollar at 64.55 and 64.60. On Friday, the rupee did not show any change against dollar for buying and selling.
On Saturday, the rupee gained 37 paisa against dollar for buying at Rs 64.18 and 40 paisa for selling at 64.20.
WORLD VALUE OF DOLLAR: In the overseas market, the dollar edged towards a seven-week high against yen, as Citigroup's results fuelled hopes that the worst of the bank losses stemming from the US housing sector are out.
Citigroup, the largest US bank, on Friday reported a quarterly loss of $5.1 billion, but investors welcomed its aggressive steps to resolve credit problems and felt more confident about the financial sector.
In the Asia, the dollar steadied against the euro during the second session, keeping losses made after softer than expected profits from Bank of America rekindled concerns the fallout from the credit crisis may not be over.
The yen firmed broadly as a slide in Asian stocks prompted investors to trim risky yen carry trades, in which players use the low-yielding Japanese currency to finance purchases of assets offering higher returns elsewhere.
In third Asian trading session, the euro eased a day after breaching the 1.60-dollar barrier for the first time on renewed jitters about the US economy, dealers said. The euro was changing hands at 1.5977 dollars in Tokyo morning trade against 1.5988 in New York late on Tuesday, when it had earlier hit a record 1.6019. The dollar was steady at 103.00 yen after 102.98, while the euro edged down to 164.55 yen from 164.63. In the forth session of the week, the euro faces setback as a whole versus the leading currencies.
Amid fifth session, the dollar maintained its firmness most of the currencies due to strong data. During the final session, in New York trading, the dollar headed for its best monthly performance in 2-1/2 years against a basket of major currencies on Friday, boosted by a growing view that the Federal Reserve may stop cutting interest rates.
US economic data this week showing resilience in some sectors, such as the labour market, contrasted with a sharp drop in business sentiment in Germany.
That news, combined with European Central Bank policy-makers' comments highlighting worries about excess volatility in foreign-exchange trading, dampened expectations for a rate hike in the euro zone and hurt the euro.
OPEN MARKET RATES: On April 21, the rupee gained 10 paisa in relation to dollar for buying and selling at 64.50 and 64.60.
The rupee also rose by 45 paisa versus euro for buying and selling at 102.05 and Rs 102.15. On April 22, the rupee gave up 20 paisa versus dollar for buying and selling at 64.70 and 64.80, and it lost 65 paisa against euro for buying and selling at 102.85 and Rs 102.95.
On April 23, the rupee shed 10 paisa against dollar for buying and selling at 64.85 and 64.95. and lost 70 paisa in relation to euro for buying and selling at 103.50 and Rs 103.60.
On April 24, the rupee gained five paisa against dollar for buying and selling at 65.80 and 65.90, and gained five paisa in terms of euro for buying and selling at Rs 103.45 and Rs 103.55.
On April, 25, the rupee shed five paisa in relation to dollar for buying and selling at Rs 65.85 and 65.95. The rupee was at Rs 102.85 and Rs 102.95 versus euro.
On April, 26, following the move by the central bank, the rupee gained Re one versus dollar for buying and selling at 64.85 and 64.95, traders said. The rupee also gained 35 paisa in relation to euro for buying and selling at 102.50 and Rs 102.65, they said.