The Rupee: Mixed pattern

RECORDER REVIEW

KARACHI: The rupee moved both ways on the currency market during the week ended on December 10, 2011, shortened due to Muharram holidays.

In inter-bank dealings, the rupee shed 10 paisa in relation to dollar for buying and selling at 89.05 and 89.10.

In the open market, the rupee gained 30 paisa versus dollar for buying at 89.00 and 40 paisa for selling at 89.20. The rupee also rose by 47 against euro for buying and selling at Rs 118.50 and Rs 119.00.

It appeared that the rupee was resisting sharp fall versus dollar and it might manage more gains, in terms of dollar, if the State Bank of Pakistan (SBP) would make some cautious policy to keep a balance between demand and supply of dollars.

The central bank should take measures to attract foreign investors because the country is not receiving investments, and this factor is also a big reason behind short supply of dollars.

One factor appearing is drying up of foreign investments in the country for last several years. The country is facing very difficult situation since the International Monetary Fund (IMF) refused to continue with the standby agreement.

Corruption in the society is rising with the passage of time, and there is no check in any sector, which is causing increase in the crimes and deteriorating law and order situation.

The government must improve law and order in the country to bring stability in all walks of life, which would bring back foreign investment into the country.

INTER-BANK MARKET DEALINGS: On Wednesday, the rupee lost 45 paisa versus dollar for buying and selling at 89.40 and 89.45.

On Thursday, the rupee gained 10 paisa in terms of dollar for buying at 89.30 and 12 paisa for selling at 89.33.

On Friday, the rupee gained 25 paisa versus dollar for buying at 89.05 and 23 paisa for selling at 89.10, dealers said.

OPEN MARKET RATES: On December 7, the rupee shed 20 paisa against dollar for buying and selling at 89.50 and 89.80. The rupee lost 49 paisa in terms of euro for buying and selling at Rs 119.46 and Rs 119.96.

On December 8, the rupee picked up 10 paisa against dollar for buying and selling at 89.40 and 89.70. The rupee picked up 35 paisa in terms of euro for buying and selling at Rs 119.11 and Rs 119.61.

On December 9, the rupee appreciated by 60 paisa in relation to dollar for buying 88.80 and 40 paisa for selling at 89.30. The rupee gained Rs 1.58 paisa versus euro for buying and selling at Rs 117.53 and Rs 118.03.

On December 10, the rupee lost 20 paisa in relation to dollar for buying 89.00 but picked up 10 paisa for selling at 89.20. The rupee lost 97 paisa versus euro for buying and selling at Rs 118.50 and Rs 119.00.

WORLD VALUE OF DOLLAR VERSUS MAJOR CURRENCIES: In the first Asian trade, the euro edged up after Italy's announcement of austerity measures prompted short-sellers to buy back the currency, though many market players saw more twists and turns in the lead-up to a European Union summit during the week.

Italian Prime Minister Mario Monti on Sunday unveiled a 30 billion euro ($40 billion) package, raising taxes and increasing the pension age in a a drive to shore up Italy's strained finances.

In the second Asian trade, euro dipped after Standard & Poor's said it might carry out a mass credit downgrade of euro zone countries if their leaders failed to move decisively on solving the region's debt woes at a summit during the week.

Risk currencies came under further pressure after the Reserve Bank of Australia cut rates by 25 basis points and left the door open for further easing, sending the Australian dollar down to $1.0180, from a peak of $1.0305 hit overnight.

In the third session, the euro clawed higher and stayed above a one-week low hit the previous day, with markets cautiously optimistic that European leaders would take decisive action to contain the region's debt crisis at a summit later in the week, Reuters said.

The euro rose 0.3 percent to $1.3435, hovering above Tuesday's low near $1.3334. There was talk of light stop-loss bids in euro at $1.3470 and also near $1.3500.

The dollar was trading versus Indian rupee at Rs 51.43, 3.1230 in relation to Malaysian ringgit, and at 6.3528 in terms of Chinese yuan.

Reuters said: In the fourth session, euro struggled to make much headway in Asia on Thursday and consolidated further ahead of an expected European Central Bank (ECB) interest rate cut and a crucial EU leader summit to address euro zone's two-year old debt crisis.

The euro hovered at $1.3401, roughly in the middle of its tight $1.3332-3486 range from the previous week. It nudged as high as $1.3428 after Nikkei business daily said the G20 was preparing a $600 billion lending facility for the IMF to help Europe, but the effect faded after it was denied by G20 and IMF officials.

The euro gained 1.5 percent since it struck a seven-week trough of $1.3213 on Nov 25, but investors were wary of taking new bets ahead of the ECB's rate review, widely expected to see them cut by at least 25 basis points to 1 percent.

Inter bank buy/sell rates for taka against dollar on Thursday were 78.20-78.60 (previous 77.21-77.80) and Call Money Rates 20.00 percent (previous 08.75-20.00 percent).

The yuan closed up slightly against dollar sday but still hit its lower daily trade limit for the seventh straight day as investors sold yuan amid strong dollar demand at the year-end.

Reuters said that in the final Asian trade, the euro dipped and languished near a one-week low as hopes dimmed that a European Union summit would make substantial progress toward containing the euro zone debt crisis.

The euro and the Australian dollar came under pressure after European leaders failed to reach an agreement on giving a banking licence to the euro zone's permanent bailout fund, the European Stability Mechanism (ESM), limiting its firepower.

The dollar was trading versus Indian rupee at Rs 52.29, at 3.1595 in terms of Malaysian ringgit, and at 6.3652 in relation to Chinese yuan.

At the week-end, the euro edged higher against dollar but sentiment remained shaky after an agreement by nearly all European Union leaders to build a closer fiscal union failed to allay concerns about the region's debt crisis.

Developments in Europe's debt markets should continue to dominate the market's attention this week, while the Federal Reserve's last policy meeting of the year could prove a non-event as no new action is expected.

The Japanese yen would remain firm against dollar in the next few months but then weaken gradually in 2012 as domestic firms would start investing overseas and the US economic recovery would gather steam, a Reuters poll showed on Dec 8.

Conducted right before a crucial European Union summit which markets hope would deliver a plan to resolve the two-year old debt crisis, the poll showed that dollar was expected to trade at 77 yen in a month, 78 in six months, and 80 in a year-unchanged from the November survey.