THE RUPEE: an all-round decline

Importers' rush for buying dollars pushed the rupee down versus US currency during the week ended on April 30, 2011. On the inter-bank market, the rupee lost 41 paisa in relation to dollar for buying at 84.68 and 40 paisa for selling at 84.70.
On the open market, the rupee shed 15 paisa versus dollar for buying and selling at 84.45 and 84.65. Euro appreciation in terms of major currencies in the world markets encouraged it to show muscle versus rupee, which fell sharply by Rs 2.25 for buying and selling at Rs 124.40 and Rs 124.90.
Despite strong demand for dollars, the rupee somehow managed to limit its losses on the back of rising remittances, improvement in export proceeds, and some precautionary measures by the State Bank of Pakistan (SBP) to keep the rupee at a certain level. These factors helped the rupee to move easily in terms of dollar and so breached the barrier of 85, Malik Bostan, Chairman of Forex Association of Pakistan (FAP) said.
Another very obvious major factor was dollar's downward revision versus major currencies during last several sessions in the international market, he said.
He also lauded the role of moneychangers, who also worked hard to make availability of dollars easier and discourage the dollarisation culture.
Higher oil prices made the payments costlier. So the rupee sometimes lost its gains versus dollar as a result of extended buying by importers.
Despite all these elements, it is expected that the rupee may rebound, surrender its gains in terms of dollar before and after the announcement of the 2011-12 budget.
Besides, before Hajj, the rupee may tumble versus dollar due to strong buying by pilgrims, but rise in remittances would definitely help the rupee to resist. This year, many Pakistanis left their motherland just to seek jobs, particularly the people who work on daily wages. Most of them were not able to get work due unemployment or lack of basic facilities and deteriorating law and situation in the country as well.
INTER-BANK MARKET RATES: On Monday, the rupee lost 23 paisa in relation to dollar for buying at 84.50 and 25 paisa for selling at 84.55.
On Tuesday, the rupee lost 13 paisa in relation to dollar for buying and selling at 84.63 and 84.68.
On Wednesday, the rupee recovered 13 paisa against dollar for buying and selling at 84.50 and 84.55. On Thursday, the rupee was unchanged against dollar for buying and selling at 84.50 and 84.55.
On Friday, the rupee lost 13 paisa in terms of dollar for buying and selling at 84.63 and 84.68 due to extended dollar buying by importers.
On Saturday, the rupee fell by five paisa in relation to dollar for buying at 84.68 and two paisa for selling at 84.70.
OVERSEAS OUTLOOK FOR DOLALRS: In the first Asian trade, the dollar hit a fresh 29-year low against Australian dollar under the weight of its low interest rates, although dealers said that trading was thin due to Easter and the dollar's direction ultimately hinged on the US Federal Reserve's policy meeting later in the week.
Market players were looking to a news conference by Chairman Ben Bernanke had planned on Wednesday after the central bank's two-day policy meeting--the first regularly scheduled news briefing by a Fed chief in the central bank's 97-year history - to see how the Fed plans to seek an exit from its easy monetary policy.
Inter-bank buy-sell rates for taka against dollar were 72.82/72.90 (previous 72.80/72.85), and Call Money Rates 5.50-10.00 percent (previous 6.00-12.00 percent).
Indian rupee was trading at Rs 44.33 versus dollar, Malaysian ringgit at 2.9950, and Chinese yuan 6.5141.
In the second Asian trade, euro slipped after European Central Bank Governor Jean-Claude Trichet said he shared the view that a strong dollar is in the interest of United States--a comment taken by some market players as showing frustration over the dollar's relentless fall and also an attempt to talk up the currency. Trichet also told two Finnish newspapers that he did not see any significant second-round inflation, prompting traders to dump euro long positions against dollar, although many traders thought that dollar would remain under pressure from a perception that the US central bank is far more reluctant to tighten its policy any time soon.
The yuan closed slightly weaker against dollar after trading below People's Bank of China's mid-point as the market awaited the central bank's signal for another leg of yuan appreciation against the dollar, traders said. The yuan has hit a slew of record highs this year but the PBOC set weaker mid-points this week, indicating a gradualist approach to managing yuan appreciation, they said.
Inter-bank buy/sell rates for taka against dollar were 72.84/72.92 (previous 72.82/72.90), and Call Money Rates: 5.50-10.00 percent (previous 5.50-10.50 percent).
Indian rupee was available at Rs 44.48 in relation to dollar and Malaysian ringgit at 2.9920.
In the third Asian trade on Wednesday, Singapore dollar hit a fresh high, and South Korean won threatened to break through a 32-month peak, leading gains in their Asian peers, as Asian policymakers were expected to keep using firm currencies to fight inflation and the Federal Reserve's unlikely surprise the market later with a hawkish stance.
Foreign exchange authorities of some countries, such as South Korea, were suspected of buying dollars, but their intervention was not to reverse their currencies' strength, but to slow it, dealers said.
Indian rupee was trading at Rs 44.51 versus dollar, Malaysian ringgit at 2.9775, and Chinese yuan was at 6.5149.
Inter-bank buy/sell rates for the against dollar were 72.85/72.95 (previous 72.84/72.92), and Call Money Rates 5.00-7.50 percent (previous 5.00-9.00 percent).
In the fourth Asian trade on Thursday, the dollar sank to a three-year low against a basket of currencies and was at risk of a drop to $1.50 versus euro, with momentum-driven investors piling on in anticipation that US interest rates would be low for a long time.
The dollar slid across the board, with Australian dollar bulldozing previous highs to a 29-year peak above $1.0900. Both the euro and the sterling scaled 17-month highs and Singapore dollar hit yet another record high.
Indian rupee was at Rs 44.32 versus dollar, Malaysian ringgit at 2.9610, and Chinese yuan was at 6.5018.
Inter-bank buy/sell rates for the taka against dollar were 72.89/72.98 (previous 72.85/72.95), and Call Money Rates 4.00-11.00 percent (previous 5.00-8.50 percent).
In the final Asian trade on Friday, dollar wallowed near a three-year low against a basket of currencies, and was on track for its biggest weekly fall since mid-January, although selling pressure eased as bears were already very short.
Sentiment for US currency took a further hit during the week after the Federal Reserve assured that it was in no hurry to tighten its ultra-loose monetary policy, a move that gave investors the green light to keep using dollar as a funding currency to buy higher-yielding assets.
Indian rupee was available at Rs 44.43 versus dollar, Malaysian ringgit at 2.9720, and Chinese yuan at 6.4926.
At the week-end, the US dollar hit a three-year low against a basket of major currencies, with month end capital flows likely to see further selling of the greenback as the Federal Reserve keeps short term interest rates near zero.
By contrast, European Central Bank has raised rates, boosting euro by 11 percent so far this year.
US dollar index hit a three-year low of 72.834 on Friday and has now fallen for five straight months, with April posting a 3.8 percent April decline.
"It's pretty close to a one-way bet (on dollar), but in foreign exchange markets, anything can happen," said Chris Turner, head of foreign exchange strategy at ING Commercial Banking in London. "US monetary policy is deflationary policy which is great news for the commodity currencies and frames the weak dollar."
The euro rose about 4.6 percent against dollar in April for its best month since September. The dollar fell 2.5 percent in the month against yen, its worst month since December.
On Friday the euro was buoyed by stronger-than-expected euro-zone inflation data that increased the chance of another ECB rate rise. Trading was thinned by a holiday in the UK for Britain's royal wedding.
The euro closed around $1.4816, little changed on the day but still near its highest since early December 2009.
Neither Washington nor Wall Street lost much sleep yet over dollar as it slipped close to all-time lows. But perhaps they should be.
The dollar has shed some 8 percent against major currencies this year, and if the decline quickens, it could provoke protectionism from America's trade partners, worsen inflation at home and spark a general loss of confidence in US assets.
That would all make it much more difficult to finance the country's huge deficits, and could threaten to send the US economy into another recession.
In fact, the burgeoning national debt is where all the negatives for dollar converge, with America's prized AAA credit rating under threat and large corporations like Caterpillar urging Washington to get its act together.
OPEN MARKET RATES: On April 25, the rupee gained 10 paisa against dollar for buying at 84.20 and 15 paisa for selling at 84.35. The rupee lost 41 paisa versus euro for buying and selling at Rs 122.56 and Rs 123.06.
On April 26, the rupee lost 20 paisa in terms of greenback for buying at 84.40 and 25 for selling at 84.60. The rupee also lost 56 paisa in relation to euro for buying and selling at Rs 123.12 and Rs 123.62.
On April 27, the rupee retained overnight levels against dollar for buying and selling at 84.40 and 84.60. The rupee lost 49 paisa versus euro for buying and selling at Rs 123.61 and Rs 124.11.
On April 28, the rupee retained overnight levels against dollar for buying and selling at 84.40 and 84.60. The rupee lost Rs 1.14 versus euro for buying and selling at Rs 124.75 and Rs 125.25.
On April 29, the rupee did not move any side against dollar for buying and selling at 84.40 and 84.60. The rupee lost 27 paisa in terms of euro for buying and selling at Rs 125.02 and Rs 125.52.
On April 30, the rupee lost five paisa against dollar for buying and selling at 84.45 and 84.65. The rupee, however, recovered 62 paisa versus euro for buying and selling at Rs 124.40 and Rs 124.90.