Despite higher demand for dollars, the rupee moved both ways in relation to US currency during the week ended on January 16, 2010. On the interbank market, the rupee posted a gain of 55 paisa against dollar for buying and selling at 84.25 and 84.30.
On the open market, the rupee showed mixed trend as it drifted lower versus dollar by 40 paisa for buying at 85.20 and 30 paisa for selling at 85.30, and gained 50 paisa versus euro for buying and selling at Rs 121.40 and Rs 121.90.
Due to sharp rise in oil prices in the overseas market, payments turned costlier. Besides, last week, the State Bank of Pakistan (SBP) lowered its current account deficit forecast for the 2009/10 (July-June) fiscal year to between 3.7 percent and 4.7 percent of gross domestic product (GDP). Compared with the SBP's previous estimate of between 4.7 percent and 5.2 percent, current account deficit in the 2008/09 fiscal year was 5.3 percent of GDP. According to the central bank, the country's foreign exchange reserves rose to 15.20 billion dollars. This factor is likely to help in erosion of the value of the rupee.
Additionally, defending the dollar's fate in the coming days, the head of the International Monetary Fund (IMF) said that the US dollar will remain de facto world currency despite predictions that the euro or Chinese yuan will soon overtake it.
Dominique Strauss-Kahn said that the US currency is going to remain the main currency in my opinion for a long period of time, even if it's challenged by some others.
He also said that China should move towards bumping up the value of its currency, after critics accused Beijing of keeping its unit artificially low. The IMF managing director also ruled out a so-called "double-dip" recession for the global economy, but said the pace of recovery has been sluggish.
INTER-BANK MARKET RATES: On Monday, the rupee gained two paisa versus dollar for buying at 84.78 and three paisa for selling at 84.82.
On Tuesday, the rupee dropped seven paisa against dollar for buying at 84.85 and eight paisa for selling at 84.90.
On Wednesday, the rupee gained seven paisa against dollar for buying at 84.78 and nine paisa for selling at 84.81. On Thursday, the rupee managed to recover 25 paisa against dollar in a single day rally for buying at 84.53 and 23 paisa for selling at 84.58.
On Friday, the rupee gained 25 paisa against dollar for buying and selling at 84.28 and 84.33. On Saturday, the rupee gained three paisa against dollar for buying and selling at 84.25 and 84.30.
OVERSEAS OUTLOOK FOR DOLLAR: In the first Asian trade, the US dollar dropped, suffering its biggest fall in six weeks in the wake of disappointing US jobs data, while the Australian dollar soared on the back of strong export numbers from China. The euro charged as high as $1.4533, from $1.4414 late in New York on Friday, with stop losses triggered around $1.4480.
During the second Asian trade, the dollar jumped against the yen and the euro after an official from China's sovereign wealth fund said the US currency has hit bottom.
But the greenback quickly reversed those gains after the official said the comments were only his personal view, prompting some investors to drop the currency.
In the third session of Asian trade, the yen paused in its gains after investor closing of long positions in the likes of the dollar, euro and higher yielding currencies appeared to have run its course and the focus shifted to US company earnings.
China's central bank surprised world markets on Tuesday by taking a step toward tighter policy, lifting the Japanese currency while commodity currencies such as the Australian and the New Zealand dollars slipped as investors unwound short-yen positions.
But yen crosses stabilised on Wednesday after losses in Shanghai's share market from the tightening seemed to contained and investors judged that the move would not derail China's growth, traders said.
In the fourth Asian trade, the yen fell broadly after a solid Australian employment report boosted risk appetite, encouraging investors to pick up higher-yielding currencies. The Australian dollar jumped after government data showed net employment increased in December for a fourth straight month and the jobless rate fell to an eight-month low, adding to the case for a further interest rate increase.
In the fifth session, the dollar was mixed in Asian trade as lacklustre US economic data cooled speculation that the Federal Reserve might raise interest rates sooner than previously expected, dealers said.
In the NY trade, the US dollar gained against most major currencies, helped by US reports indicating a rise in manufacturing alongside stable consumer price inflation, while pressure on the euro persisted over concerns about the Greek economy. In the coming week, the dollar is likely to benefit from concerns about the euro arising from Greece's fiscal problems, but the greenback's gains are seen limited by uncertainty about the outlook for the US economy.
Greece slid into its first recession in 16 years in 2009 and is poised to become the euro zone's most indebted member this year, with debt estimated at more than 120 percent of gross domestic product.
OPEN MARKET RATES: On January 11, the rupee did not move any side against dollar for buying at 84.80 while it slid after gaining 10 paisa for selling at 84.90. The rupee, however, lost 85 paisa versus euro for buying and selling at Rs 122.75 and Rs 123.25.
On January 12, the rupee gave up 20 paisa for buying and selling versus greenback, at 85.00 and 85.10. The rupee, however, gained in terms of the euro, picking up 15 paisa for buying and selling at Rs 122.60 and Rs 123.10.
On January 13, the rupee dropped 20 paisa for buying and selling at 85.20 and 85.30. The rupee also shed 15 paisa in relation to euro for buying and selling at Rs 122.75 and Rs 123.25.
On January 14, the rupee losing five paisa versus dollar for buying and selling at 85.25 and 85.35. The rupee extended its slide in terms of the euro, falling 65 paisa for buying at Rs 123.35 and 60 paisa for selling at Rs 123.85.
On January 15, the rupee gained 10 paisa versus dollar,for buying and selling at 85.15 and 85.25. The rupee also recovered 90 paisa in terms of euro, picking up 90 paisa for buying and selling at Rs 122.45 and Rs 122.95.
On January 16, the rupee shed five paisa versus dollar for buying and selling at 85.20 and 85.30. The rupee, however, recovered Rs 1.05 against the euro for buying and selling at Rs 121.40 and Rs 121.90.