PAKISTAN RUPEE: currency market in grip of uncertainties


KARACHI (August 25 2008): The rupee somehow managed to resist sharp fall against the dollar during the week ended on August 23, 2008 amid rising uncertainties over the future of politics in the country.

On the interbank market, the rupee lost 60 paisa versus the US currency for buying and selling at 75.90 and 76.00, while it moved both ways on the open market, gaining 55 paisa for buying at 75.50 and shedding 25 paisa for selling at 76.50.

However, the rupee strengthened versus the euro, gaining 110 paisa for buying at Rs 110.15 and 90 paisa for selling at 110.30. Money market analysts said that the rupee was in the grip of rising uncertainties on the political front. Delay in political settlement was causing jitters among the businessmen and investors.

The market was waiting for the solution of political issues after the debate in Parliament as Nawaz Sharif agreed on Friday to a debate in parliament next week on the restoration of judges, putting back the deadline on a demand that could split the ruling coalition.

The currency market during the week welcomed the announcement by President Pervez Musharraf for his resignation in the face of an impending impeachment motion by the ruling coalition. The widening gap between imports and exports was a solid reason for the rising demand for dollars to meet external payments. How the coalition government would tackle the emerging basic problems and challenges and what happens next, were the questions whose answers were being anxiously sought.

The feature of the week was the rupee’s short-lived recovery against dollar following the announcement regarding resignation by General Musharraf. Thereafter the rupee started travelling towards the negative territory.

INTER-BANK MARKET RATES: On August 18, the rupee rose against dollar by 130 paisa at 75.30 for buying and 125 paisa for selling at Rs 75.40.

On August 19, the rupee rose by 120 paisa against dollar for buying at 74.50 and 80 paisa for selling at Rs 74.60.

On August 20, the rupee was down by 30 paisa against dollar for buying at 74.80 and 25 paisa for selling at 74.85. On August 21, the rupee lost sharply against dollar, 130 paisa for buying at 76.10 and 135 paisa for selling at 76.20.

On August 22, the rupee somehow managed to resist sharp fall yet lost 35 paisa against dollar for buying and selling at 76.45 and 76.55. On August 23, the rupee gained 55 paisa against dollar for buying and selling at 75.90 and 76.00.

WORLD VALUE OF DOLLAR VS MAJOR CURRENCIES: On the first day of week, the dollar hit a six-month high against euro but then slipped as oil and commodity prices bounced back, but losses were limited on mounting worries that the euro zone economy was stalling.

Oil rose more than $1 to above $115 a barrel on supply concerns, as markets settled down from a sharp sell-off in the euro, Australian dollar and commodities in the past two weeks when investors unwound bets on the global economy holding up.

During the second session, the dollar was little changed near a seven-month high against a basket of currencies, while gold and oil prices dropped on concern that the global economy was slowing down.

The dollar’s two-week surge has been reinforced by the slide in gold and oil, as investors have rushed to unwind bets that major world economies would weather the US downturn and the credit crisis better.

But analysts said the dollar may have a harder time building on its two-week surge. Worries about the health of US mortgage financing giants Fannie Mae and Freddie Mac returned to the fore on a report saying they may need to be nationalised.

In the third Asian trading, the dollar steadied, but was off a seven-month high as a recovery in gold and oil prices as well as concerns about the US financial system weighed on sentiment for the greenback.

In the final Asian trading, the dollar limped up, recovering a little after its biggest one-day drop in five months, but worries about the US financial sector limited the greenback’s rally.

In the final Asian trading, the dollar limped up, recovering a little after its biggest one-day drop in five months, but worries about the US financial sector limited the greenback’s rally.

The dollar’s sharp slide the previous day was mostly due to market players being forced to unwind bets favouring the US currency after having chased it to eight-month highs, traders said.

In the New York market, the dollar soared, recovering from the previous day’s losses, as gloomy British growth data backed views of a slowing global economy and raised prospects of interest rate cuts outside the United States.

For the next week, the scorching pace of the dollar’s rally may slow down in the coming days as a full slate of economic data presents some potential hazards – but little appears on the late-summer horizon to keep the greenback from notching its best one-month performance in more than a decade.

The US economic calendar will dominate headlines, highlighted by housing data early in the week and a second reading of second-quarter gross domestic product on Thursday.

OPEN MARKET RATES: On Monday, the rupee rose by 45 paisa against dollar for buying at 76.05 and 75 paisa for selling at 76.25. The rupee held its overnight level versus euro for buying at 111.30 and also gained 60 paisa for selling at 111.40. On Tuesday, the rupee recovered Rs 2.65 against dollar for buying at 73.40 and Rs 2.45 for selling at 73.80.

The rupee also gained sharply versus euro, picking nearly Rs 5 for buying and selling at Rs 106.05 and Rs 106.20.

On Wednesday, the rupee gave up 20 paisa against dollar for buying at Rs 73.60 and 70 paisa for selling at 74.50. The rupee drifted lower in relation to the euro, losing sharply Rs 2.35 at Rs 108.40 and Rs 2.40 to Rs 108.60.

On Thursday, the rupee shed 145 paisa against dollar for buying at 75.05 and 90 paisa for selling at 75.40.

The rupee also lost steeply against the euro for buying and selling at 110.30 and Rs 110.50. On Friday, the rupee fell versus the dollar, losing 155 paisa for buying at 76.60 and 175 paisa for selling at 77.15.

The rupee followed same print against the euro, shedding Rs 2.30 for buying at Rs 112.50 and it was down by Rs 2.20 for selling at 112.70.

At the weekend, the rupee shrugged off the overnight weakness against dollar, gaining sharply by Rs 1.10 for buying at 75.50 and 65 paisa for selling at 65 to Rs 76.50. The rupee, however, lost its value in relation to the euro, losing Rs 2.35 for buying at Rs 110.15 and it shed Rs 2.55 for selling at Rs 110.30.

Courtesy: Business Recorder, 25/8/2008

Leave a Reply