Excessive dollar buying dominated the currency market during the week ended on June 21, 2008. In the interbank market, the rupee lost 45 paisa against dollar for buying at 67.40 and 46 paisa for selling at 67.45.
In the open market, it shed 45 paisa versus dollar for buying at 68.30 and 40 paisa for selling at 68.50. In terms of euro, it lost Rs 1.55 for buying and selling at 105.80 and Rs 105.90.
It appeared that apart from other factors, year-end payments compelled importers to make fresh buying of dollars to clear bills. Surge in the oil prices in the world markets played a basic role in the sharp rise in the local market. The demand for dollar surged, which raised the rate of the US currency. As a result, current account deficit has broken all record as about 13 billion dollars in 11 months of the current fiscal year.
This also gives the impression that the prices of commodities might go up in the coming days as the oil prices raced to all-time highs of almost 140 dollars a barrel last week despite Saudi plan to increase output soon. In the middle of the week, the rupee managed to recover some gains but the next day it gave up its gains due to rush for dollars by importers.
The rupee gained strength following statement by State Bank that foreign currency inflows of up to 3.5 billion dollars were expected. However, dealers said outflows from the stock market were likely to add some pressure on the rupee in the coming days. The Karachi Stock Exchange (KSE) benchmark 100 share index shed 8.3 percent last week.
According to the weekly statement by the central bank, the country's forex reserves fell by 44 million dollars to 10.91 billion dollars. The rupee has depreciated 9 percent since the beginning of the year but has recovered 3.5 percent since it hit its lowest closing on May 20.
INTER-BANK RATES: On Monday, the rupee lost 30 paisa against dollar for buying at 66.95 and 24 paisa for selling at 66.99, currency dealers said. On Tuesday, the rupee gained five paisa in relation to dollar for buying at 66.90 and four paisa for selling at 66.95.
On Wednesday, the rupee shed five paisa against dollar for buying and selling at 66.95 and 67.00. On Thursday, the rupee lost 45 paisa against dollar for buying at 67.40 and 50 paisa for selling at 67.50.
On Friday, the rupee gained five paisa against dollar for buying at 67.35 and 10 paisa for selling at 67.40, currency experts said.
The rupee ended the week on bearish sentiment, losing five paisa against the dollar for buying and selling at 67.40 and 67.45.
WORLD VALUE OF DOLLAR: In the first session, the dollar neared a four-month high against the yen, having earlier dipped after Group of Eight (G-8) finance ministers failed to produce a strong message against dollar weakness at their weekend meeting.
In the second Asian trading session, the dollar fell against euro and yen after a media report that Federal Reserve officials believe financial markets have gone too far in their forecasts for higher US interest rates. Market expectations for the Fed to boost rates three or four times by the end of the year do not seem to match the balance of views within the central bank, the Financial Times.
Amid third Asian session, the dollar steadied against the yen after slipping the previous day on news that US housing starts fell to a 17-year low, casting more doubt on how much the Federal Reserve might boost interest rates in the coming months.
In the fourth session, the dollar fell against yen and euro as investors grew sceptical that the Federal Reserve would raise interest rates aggressively, given the weak economy and renewed worries about the financial sector.
In the fifth Asian session, the dollar dipped against the yen as a fall in Tokyo share prices tempered demand for risky carry trades. The dollar retreated against the yen and euro earlier this week on renewed concerns about the US economy. Such worries were stoked by weak economic indicators, including data that showed housing starts plunged to a 17-year low.
But the dollar gained some reprieve on Thursday as oil plunged nearly $5 and traders said the currency could see more gains, especially against euro, if oil prices decline further.
At the weekend, in the NY market, the dollar fell broadly as fears of further write-downs in the US financial sector raised speculation the Federal Reserve would not signal a shift toward tighter monetary policy when it meets next week.
Rising oil prices, more inflation-busting talk from a European Central Bank official and an unexpected surge in German producer prices in May to a near two-year high added to selling pressures on the greenback.
OPEN MARKET RATES: On June 16, the rupee slipped 20 paisa against the dollar for buying and selling at 67.85 and 68.10, dealers said.
The rupee, however, rose by 15 paisa versus euro for buying and selling at Rs 104.25 and Rs 104.35, they said.
On June, 17, the rupee lost 30 paisa for buying at 68.15 and 25 paisa for selling at 68.35 in relation to US currency, , they said. The rupee lost Rs 1.15 for buying and selling against euro at Rs 105.40 and Rs 105.50, dealers said.
On June 18, the rupee firmly held its overnight level against dollar for buying at 68.15 and gained 10 paisa for selling at 68.25, they said.
The rupee also gained 15 paisa against euro for buying and selling at 105.25 and Rs 105.35, dealers said. On June 19, the rupee lost 20 paisa against dollar for buying at 68.35 and 25 paisa for selling at 68.50, they said.
The rupee followed same trend versus euro, falling 30 paisa for buying and selling at Rs 105.55 and Rs 105.65, dealers said.
On June 20, the rupee gained 25 paisa for buying at 68.10 and 15 paisa for selling at 68.35 versus dollar. The rupee also looked ahead versus the euro, rising 25 paisa against the euro for buying and selling at 105.30 and Rs 105.40.
On June 21, the rupee lost 20 paisa in terms of dollar for buying at 68.30 and 15 paisa for selling at 68.50. The rupee also shed 50 paisa for buying and selling against euro at 105.80 and Rs 105.90.