Despite rising trend in remittances, the rupee remained under pressure against dollar during the week ended on September 3, 2011, shortened to two days' trading due to Eid-ul-Fitr holidays. In the interbank market dealing, the rupee lost 15 paisa in relation to dollar for buying at 87.28 and 17 paisa for selling at 87.33.
On the open market, the rupee was also down against the greenback for buying and selling at 86.80 and 87.00. The rupee, however, gained 47 paisa versus the euro for buying and selling at Rs 125.01 and Rs 125.51.
Weak sentiment dominated the currency market and the rupee fell most of the time due to higher demand for dollars. The demand for dollars particularly went up as a result of increase in buying by importers.
Rupee's fall was rather surprising because remittances rose during the month of Ramazan. Millions of Pakistani workers, living abroad, come to Pakistan to celebrate Eid with their relatives, and bring foreign exchange with them. This helps the rupee to post gains versus dollar. But, this year, the rupee could not perform well just because of higher demand by importers.
Remittances may be 25 to 30 percent higher, amount in dollars may be 1.25 to 1.3 billion dollars.
INTER-BANK MARKET: On Monday the rupee shed 5 paisa versus dollar for buying at 87.18 and 7 paisa for selling at 87.22.
On Tuesday, the rupee lost 10 paisa versus dollar for buying and selling at 87.28 and 87.33.
OVERSEAS MARKET OUTLOOK FOR DOLLAR: In the first Asian trade, dollar came under light pressure against a basket of major currencies, with traders speculating that Federal Reserve might offer more stimulus this month in the face of an uncertain growth outlook.
While Fed Chairman Ben Bernanke gave no details of further action to boost the US recovery at an eagerly awaited speech on Friday, he said the central bank would extend its September policy meeting to two days to consider its options.
"If the economy were to fall into recession, we believe the Fed would initiate another round of quantitative easing," Michael Carey, chief economist for North America for Credit Agricole, said in a note to clients.
Inter bank buy/sell rates for the taka against dollar on Monday were 73.80/74.20 (previous 73.35/73.88), and Call Money Rates 12.00-20.00 percent (previous 12.00-20.00 percent.
The US currency was trading at Rs 46.15 in relation to Indian rupee, at 2.9795 in terms of Malaysian ringgit and at 6.3844 versus Chinese yuan.
In the second Asian trade, New Zealand dollar hit a one-month peak, as it led a pack of commodity currencies higher amid improved risk appetite. Australia dollar held onto hefty gains.
The kiwi surprised with the strength of its gains as Asia-Pacific markets followed the lead of regional stocks. Dealers said the currency had been in demand following an offshore risk asset rally on encouraging US data and European news that seemed to have soothed recession fears.
It gained further momentum when the kiwi moved through the key $0.8500 level which triggered some stop-loss buying.
"There has been some kiwi buying against US dollar, a little bit against the Aussie as well, but kiwi against euro is the major one," said ASB Bank head of institutional FX sales Tim Kelleher.
Dollar was trading at Rs 45.96 against Indian rupee. China's yuan closed up versus dollar at 6.3805 after hitting an all-time peak in intra-day trade on Tuesday as the People's Bank of China set another record high mid-point, with traders predicting further rises for the rest of the year.
In third Asian trade, renewed concerns about the euro zone sovereign debt crisis weighed on the single currency, while dollar also struggled after minutes of US Federal Reserve's August 9 meeting bolstered expectations for more stimulus. The dollar and euro both dipped against yen, as Japanese exporters bought the currency.
The euro remained under pressure after lukewarm demand at an Italian bond auction threatened to push the euro zone's third biggest economy back to the centre of the region's debt crisis.
Dollar was trading versus Indian rupee at Rs 46.09, at 2.9810 versus Malaysian ringgit, and at 6.3798 in relation to Chinese yuan.
During fourth Asian session, yen fell across the board after dollar buying by Japanese accounts spurred more broad-based purchases of the greenback, lifting it above 77 yen and soothing jitters that another round of intervention by Tokyo authorities might soon be on the way.
Dollar was pushed to a session high of 77.25 yen after a British fund, some US accounts, and several Tokyo banks followed a major Japan bank that made large dollar purchases in what appeared to be a specific transaction unrelated to fundamentals or particular positions, traders said.
Dollar was available at 46.09 versus Indian rupee, at 2.9810 in relation to Malaysian ringgit, and at 6.3787 in terms of Chinese yuan.
The dollar was likely to trend lower after another abysmal US jobs report on Friday, which investors perceived as raising the likelihood of further action by the Federal Reserve to aid the economy.
With the benchmark US interest rate already close to zero, the Fed was limited in actions it could take.
Two rounds of quantitative easing, costing $2.3 trillion, where the US central bank bought government securities for its own balance sheet, simultaneously increasing liquidity in the economy, failed to increase economic growth.
Market expectations were still rising that the Fed would embark on a third round of such easing. But investors in foreign exchange noted that raising the supply of dollars would lower its value.
There was a bold prediction to feed Western worries that power was shifting inexorably to the East: China's yuan could overtake US dollar as world's principal reserve currency as soon as the next decade.
Beijing has been promoting use of yuan beyond its borders since 2009 to settle trade transactions. The resulting build-up of deposits in Hong Kong has spawned a thriving yuan bond market.
Internationalising yuan, also known as 'renminbi' (RMB), brings with it a host of financial and political benefits. Notably, it allows China to build up claims on the rest of the world in yuan rather than increasing exposure to foreign currencies, especially a dollar that it distrusts.
But the consensus has been that China, as is its wont, would tread gingerly. The ruling, risk-averse Communist Party would keep capital controls in place, thus retaining its grip over the exchange rate and interest rates but preventing yuan from becoming a truly international currency.
OPEN MARKET RATES: On August 29, the rupee retained the overnight level in relation to dollar for buying and selling at 86.70 and 86.90. The rupee lost 36 paisa versus euro for buying and selling at Rs 125.84 and Rs 126.34.
On August 30, the rupee lost 10 paisa in relation to dollar for buying and selling at 86.80 and 87.00. The rupee, however, recovered 83 paisa in terms of the euro for buying and selling at Rs 125.01 and Rs 125.51.