THE RUPEE: all-round decline

Higher demand for dollars forced the rupee to hit the lowest level of 86.59 for selling against dollar on the money market during the week ended July 30, 2011. In interbank dealings, the rupee lost 37 paisa versus dollar for buying at 86.55 and 39 paisa for selling at 86.59 owing to rise in dollar buying by importers.
On the open market, the rupee followed the suit, losing 15 paisa in terms of dollar for buying at 86.15 and 25 paisa for selling at 86.35. The rupee also shed 44 paisa in relation to euro for buying and selling at Rs 123.70 and 124.20.
The dollar gained against rupee on the back of rising demand by importers, who made aggressive dollar buying to meet the payment requirements. It was noted that dollar was under pressure in the international market during the week, but despite this, it managed to gain in the local market. In the middle of the week, the rupee, improved on rising inflows, but it looked that the rupee may come under pressure slightly versus dollar. According to the State Bank of Pakistan (SBP), the foreign exchange reserves improved to 18.30 billion dollars last week. Higher remittances and export receipts are likely to help rupee to resist sharp erosion in its value in terms of US currency.
Interestingly, world's major currencies are appreciating against dollar due to hovering US debt default, but national currency tumbled owing to higher dollar buying by importers to clear payments, particularly for oil and some other items. Under the circumstances, the rupee was not able to look ahead. There was no benefit to the rupee from dollar's world-wide fall. One factor appeared that if US debt default crisis deepened, this could be further harmful for the country's out of track economy.
If textile exports earnings maintain the present pace, the country may be able to minimise trade deficit in the near future. To achieve the target, the textile exporters must keep their products from all contamination.
Another thing which appeared last week was that commerce ministry may celebrate achievement of 25 billion dollars exports in 2010-11. The question was: what had the commerce ministry done for the success? The factor for growth in exports during last fiscal year was higher commodity prices, which pushed up most of export items and not because of rise in export volume. The surge in textile export earnings was directly related to hike in raw cotton prices in the world market. The average price of lint in the international market during 2010-11 stood at 1.26 dollars per pound with highest level touching over 2 dollars per lb. Same trend was witnessed in the domestic market as cotton prices touch all-time high level at Rs 14,000 per maund during the same period. The achievement was not because of any extraordinary measure to boost the textile earnings.
In fact, all credit goes to the 'soaring prices' of commodities worldwide. Those countries which exported non-engineering products and depended on agro-based industry benefited from this phenomenon. To get real achievements in basic fundamentals, country's all ministries have to begin practical from grass-root level, instead of beating drums of so-called achievement. First of all, ministries must solve the crisis of water shortage, less gas supply, lack of electricity, skyrocketing of commodity prices and not easy availability of jobs.
According to some analysts, the US may lose its 'AAA' credit rating which could be damaging for the US currency and it could lose more in the international market. The US faces the prospect of a default on some of its 9.6 trillion dollars bonds outstanding while the government is struggling to increase debt ceiling (government needs higher borrowing).
INTERBANK MARKET: On Monday, the rupee dropped 16 paisa versus dollar for buying at 86.34 and 17 paisa for selling at 86.37.
On Tuesday, the rupee lost four paisa against dollar for buying at 86.38 and five paisa for selling at 86.42.
On Wednesday, the rupee touched the low level versus dollar for buying and selling at 86.56 and 86.58.
On Thursday, the rupee rebounded and gained 11 paisa versus dollar for buying at 86.45 and eight paisa for selling at 86.50.
On Friday, the rupee shed eight paisa versus dollar for buying 86.53 and seven paisa for selling at 86.57.
On Saturday, the rupee shed two paisa in relation to dollar for buying and selling at 86.55 and 86.59.
OVERSEAS MARKET OUTLOOK: In first Asian trade, dollar dipped as US lawmakers could not reach a deal to raise the country's debt ceiling with only a little over a week remained before the deadline to avert a default. Most investors assumed that sanity would reign in Washington and a debt deal would be done. But lack of progress in talks over how to cut the US budget deficit was making market players nervous.
The dollar fell to a four-month low against yen of 78.12 yen and shed 0.6 percent against Swiss franc to 0.8132 franc, about a centime away from its record low hit previous week. The uncertainty over the US debt crisis also kept growth-linked currencies, such as Australian dollar, in check.
Yuan hit a record high against dollar, reversing the morning's fall and in spite of a slightly lower mid-point fixing as the market braced for further losses in dollar.
Inter bank buy/sell rates for taka against dollar were 74.65/74.70 (previous 74.66/74.70) and Call Money Rates 9.00-12.00 percent (previous 9.00-12.00 percent).
Indian rupee was available at Rs 44.35 versus dollar and Malaysian ringgit at 2.972. In second Asian trade, dollar hit record low against Swiss franc and a four-month trough versus yen, as investors were skeptical that US President Barack Obama's call for compromise would lead to a swift breakthrough in deadlocked debt talks.
There was broad pressure on the greenback, with New Zealand dollar climbing to a post-float high, Australian dollar hitting a three-month peak, while euro extended its gains versus dollar after breaching chart resistance.
Yuan closed up against dollar after hitting a record trading high as the People's Bank of China set its mid-point at an all-time high after dollar index sank to a seven-week low. Indian rupee was tradubg at Rs 44.40 versus dollar and Malaysian ringgit was available at 2.9620.
Inter bank buy/sell rates for taka against dollar were 74.62/74.69 (previous 74.65/74.70) and Call Money Rates: 8.00-12.00 percent (previous 6.00-12.00 percent).
In third Asian trade, dollar sank to a three-month low against a basket of major currencies as markets fretted about the prospect of a US debt default and downgrade, while they cautiously waited to see if Japan would intervene to weaken yen.
Traders betting on rate differentials intensified their selling of the greenback following stronger-than-expected Australian inflation data, fuelling Australian dollar's rally through key resistance to a 29-year peak at $1.1063.
Yuan closed lower against dollar after hitting an all-time high for a sixth straight trading day as the People's Bank of China took advantage of weak dollar to engineer further appreciation in Chinese currency.
Inter bank buy/sell rates for taka against dollar were 74.66/74.75 (previous 74.62/74.69) and Call Money Rates 7.50-11.00 percent (previous 8.00-12.00 percent). India rupee was trading at Rs 44.18 versus dollar and Malaysian ringgit was available at 2.9380.
In fourth Asian trade, euro struggled to find fans in Asia on renewed fears of contagion in Europe, while dollar remained on the defensive as Washington showed no signs of progress in debt agreement.
The dollar and euro both sagged against yen after Japanese Economics Minister Kaoru Yosano was quoted by Jiji news agency as saying that currency intervention as big as 1 to 2 trillion yen ($13-26 billion) would be quite difficult.
Indian rupee was trading at Rs 44.08 versus dollar, Malaysian ringgit at 2.9565 and Chinese yuan was at 6.4434. Inter bank buy/sell rates for taka against dollar were 74.65/74.75 (previous 74.66/74.75) and Call Money Rates 7.00-10.50 percent (previous 7.50-12.00 percent.
With four days left before the United States to hit its debt limit, Republicans pressed ahead with a deficit plan that cannot pass Congress, and President Barack Obama told lawmakers to stop wasting time and find a way "out of this mess".
In the final Asian trade, dollar came under broad pressure, sinking to a four-month low against yen while risk currencies faltered after the House of Representatives delayed a vote on a Republican proposal to raise the US government's debt limit, adding to uncertainty ahead of an August 2 deadline.
Euro relinquished earlier gains and was down about 0.5 percent at a session low of $1.4265 after Moody's said it might cut Spain's credit rating, fuelling fears about euro zone's debt problems and weighing further on Australian and New Zealand dollars.
Urgent efforts to avoid an unprecedented US debt default hit another snag when conservative rebel Republican lawmakers refused to back a budget deficit plan proposed by their own leaders, who put off a vote scheduled for Thursday night.
"People got scared and they're selling the dollar ... its fall below 77.00 yen would pave the way to the record low of 76.25, heightening the possibility of the Bank of Japan stepping in with solo intervention," said a trader for a Japanese bank.
Indian rupee was trading at Rs 44.08 verus dollar, Malaysian ringgit at 2.9530 Chinese yuan was at 6.4435.
At the week-end, dollar hit a record low against Swiss franc and a four-month trough against yen, both traditional safe-haven currencies, as weak data on US economic growth ignited fears that the economy could slip into another recession.
The lawmakers were still unable to reach an agreement on US debt ceiling, but there was no arguing that dollar's safe-haven appeal should remain trumped by the Swiss franc and Japanese yen.
OPEN MARKET RATES: On July 25, rupee gained 10 paisa against dollar for buying at 85.95 but remained unchanged for selling at 86.10.
The rupee dropped eight paisa in terms of euro for buying and selling at Rs 123.34 and Rs 123.84. On July 26, rupee shed 20 paisa for buying at 86.15 and 15 paisa for selling at 86.25. The rupee also dropped by 92 paisa in terms of euro for buying and selling at Rs 124.26 and Rs 124.76.
On July 27, the rupee did not show any change for buying at 86.15 while it dropped 10 paisa for selling at 86.35. The rupee dropped 10 paisa in terms of euro for buying and selling at Rs 124.36 and Rs 124.86.
On July 28, the rupee did not show any change against dollar for buying at 86.15 while it rose by five paisa for selling at 86.30. The rupee, however, recovered Rs 1.32 in terms of euro for buying and selling at Rs 123.04 and Rs 123.54.
On July 29, the rupee did not show any change for buying at 86.15 while it shed five paisa for selling at 86.35. The rupee, however, gained 50 paisa in terms of the euro for buying and selling at Rs 122.54 and Rs 123.04.
On July 30, the rupee did not show any change in relation to the US currency for buying and selling at 86.15 and 86.35, while it fell sharply versus euro by Rs 1.16 for buying and selling at Rs 123.70 and Rs 124.20.