Apr 222008

KARACHI – In connection with the huge demand of dollars by oil and gas exploration and production companies, the rupee would remain under pressure against firm and strong position of dollar in the inter bank market, at least in the short term, The Nation learnt on Monday.
Research analyst from KKI Private Ltd, said, “on the fundamental ground, the flow of dollar is linked with demand and supply and by the end of this fiscal year on June 31, the dollar would remain strong versus national currency, increasing its higher demand because by the end of each financial year, the demand of US$ gets stronger in the inter bank market”. At the same time, in the supply end, the US currency would obtain more potency in the open market on the back of home remittances which was continued to increase for the last 3 to4 years that would be positive healthy notion for dollar, he added. 
The forex currency dealer told The Nation that due to appreciation of dollar against rupee, there was no shortage of that currency for its buyers in the open market by virtue of achieving its gain and up ward trend versus rupee which was being available at Rs 64.40 and Rs 64.50 for buying and selling respectively.
The oil companies are booking their orders in dollars and due to increasing oil prices; these companies get book higher prices. The oil and gas selling prices for the E&P companies in Pakistan are directly connected with the FOB prices of Arab Light Crude converted to Pak Rupee. The rising Rs/US$ parity would enhance the revenues of E&P companies improving the bottom line of the sector. 
Thus, E&P sector would be amongst the primary beneficiaries of rising Rs/US$ parity since their returns are based on US$. 
However, the impact on OMCs would be neutral to negative. All the local energy oil product prices are linked with the international oil prices, hence local and imported purchase prices are same for the OMCs. 
Though increase in Rs/US$ parity inflates the cost of purchases, the impact on the cash flows would be different for regulated and deregulated products. The cash flow impact would be neutral in case of deregulated products (including furnace oil and jet fuel) since OMCs pass on the impact to the end consumers. In case of regulated products (including diesel, petrol, kerosene), the impact would be negative. In both the cases, however, margins would remain intact. 
It has been reported that the rupee might cross the barrier of 65 as it easily has breached an important mark of 64 due to higher demand for dollars in both inter-bank and the open market during the week, ended April 19, 2008. During last t week, Rs/US$ parity continued its downtrend & closed at Rs64.07. It is after a gap of more than six years that rupee has touched such a low against the dollar. The previous high of Rs 64 was witnessed on Sep 29, 2001.
In the inter-bank market, rupee continued to lose versus dollar amid dollar’s demand remained high in the dealings. 
The American currency commenced new day’s trading at Rs 64/05, recovered more grounds and was changing hands at Rs 64/08 at close of markets on Monday. 
Thus, rupee lost another 0/03 paisas versus dollar in the dealings. 
In open market, rupee depreciated by 0/10 paisas versus greenback in the open market. The US dollar started off new day’s trading at Rs 64/40, posted mere gains and was changing hands at Rs 64/50 at close of markets on Monday. Thus, rupee ended the day on a negative note against dollar in the open market. In the same month in 2007, the US dollar was trading at Rs 60/77 versus rupee in the local dealings. 
Therefore, rupee lost Rs 3/73 from 21st April 2007 to date.
On the other hand, the forex analyst seems, the current trend of dollar-rupee disparity is likely to be reversed and the rupee will be able to retain its strong position against dollar in inter bank market owing to SBP intervention but it must be noted here that the market economy is driven by supply and demand mechanism however, being a regulatory authority, SBP can intervene indirectly by influencing on exchange companies. 

Courtesy: the Nation, 22/4/2008

 Posted by at 6:42 am

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