THE RUPEE: rising trend

The rupee managed to recover most of the ground against dollar, but fell versus euro during the week ended on October 14, 2011. In the interbank dealings, the rupee gained 89 paisa in relation to dollar for buying at 86.51 and 90 paisa for selling at 86.55 due to easy supply of dollars.
On the open market, the rupee posted gain of 50 paisa in terms of US currency for buying and selling at 86.80 and 87.30. However, it lost Rs 1.04 in relation to euro for buying and selling at Rs 119.89 and Rs 120.39.
It is most likely for the rupee to recover more ground versus dollar in near future as a result of measures taken by the State Bank of Pakistan (SBP). However, time will tell how the rupee would retain its levels when the country would start making payments to the International Monetary Fund (IMF) from next February. In a surprising move by the SBP, large rate cut was seen last week. Aimed at spurring growth, it may end up in widening the deficit and spurring inflation in the fragile economy.
In September, according to the Federal Board of Statistic (FBS), trade deficit widened to 5.1 billion dollars as exports dipped by 6.5 percent on sluggish production. The rate cut of 150 basis points (bps) might ease some fiscal pressure in terms of debt servicing cost, but it might also be negated by the fall in the rupee, which would make it harder to repay foreign loans in the short-run. But, as a whole, the inflation is still a concern for the nation. Under the circumstances, the nation is not able to make up its mind whether or not inflation is sustainable or not.
Besides, despite the outflows, in the first quarter of current fiscal year 2011-12, remittances surged to 3.297 billion dollars, the State Bank of Pakistan (SBP) reported last week.
INTER-BANK MARKET: On Monday, the rupee shed 5 paisa against dollar for buying at 87.45 and 3 paisa for selling at 87.48.
On Tuesday, the rupee picked up 6 paisa in terms of dollar for buying at 87.39 and 5 paisa for selling at 87.43.
On Wednesday, the rupee gained 19 paisa in relation to dollar for buying at 87.20 and 18 paisa for selling at 87.25.
On Thursday, the rupee gained 36 paisa versus dollar for buying at 86.84 and 37 paisa for selling at 86.88.
On Friday, the rupee gained 33 paisa against dollar for buying at 86.51 and 32 paisa for selling at 86.56.
On Saturday, rates were not issued by banks as the State Bank of Pakistan (SBP) and all offices started observing five-day working week from October 15, 2011. The decision is understood to have been taken to overcome the electricity crisis.
OVERSEAS MARKET OUTLOOK FOR DOLLAR: In the first Asian trade, the euro rose, buoyed by a flurry of short-covering, after leaders of Germany and France promised a new comprehensive plan by the end of the month to recapitalise euro zone banks.
The meeting between German Chancellor Angela Merkel and French President Nicolas Sarkozy offered no details, but drew a pledge to do what is necessary to shore up banks, settle the Greek debt crisis and help growth in Europe, giving a gentle boost to risk sentiment.
Market players, however, remained cautious, given the lack of details and since EU leaders have promised several times before to resolve the debt crisis, to no avail.
Interbank buy/sell rates for taka against dollar were 75.48-75.52 (previous 75.48-75.50) and Call Money Rates: 6.25-7.75 percent (previous 6.25-7.75 percent).
The yuan ended at a record closing high against dollar, scoring its biggest daily gain and up more than 30 percent on US currency since its landmark revaluation in July 2005, as recent worries over dollar liquidity eased. The dollar was trading against Indian Rs at 49.09 and at 3.1310 in terms of Malaysian ringgit.
In the second Asian trade, euro clung to Monday's huge gains after hopes for a new EU debt plan sparked a correction in a deeply bearish market, though sentiment remained fragile as European leaders had disappointed many times before.
The euro held steady at $1.3642. Monday's rally followed a Franco-German pledge of Sunday that they would do what is necessary to shore up banks, settle the Greek crisis and help growth in Europe.
The yuan reversed sharply against dollar on Tuesday, scoring its biggest daily fall in nearly a year, brushing aside a record central bank mid-point as the market expected no Chinese policy change towards a faster pace of yuan rises any time soon.
The euro fell on profit-taking after Slovakia voted down measures to enhance Europe's bailout fund, seen as vital to taming euro debt crisis. The single currency eased to $1.3518 and 104.46 yen in Tokyo trade against $1.3636 and 104.52 yen in New York late on Tuesday. The dollar was at 76.70 yen against 76.65 yen.
Billionaire investor George Soros and some 100 former European dignitaries on Wednesday published an open letter, warning that the eurozone debt crisis could bring down the global financial system.
"The euro is far from perfect," they wrote in German business daily Handelsblatt. In the third session of the Asian trade, euro dipped, taking a break from its recent corrective rally made on hopes for a solution to the debt crisis with fragile risk sentiment souring after the Slovak parliament rejected a plan to expand the euro zone rescue fund.
But euro and Australian dollar managed to come off intra-day lows after a rebound in Shanghai stocks on talk that the country's sovereign wealth fund had been supporting bank shares.
China's yuan reversed earlier fall to close firmer against dollar as state-run Chinese banks sold dollars after yuan fell to its lower daily limit on speculation that a US bill prodding China to let yuan rise at a faster pace could spark retaliatory steps.
Interbank buy/sell rates for taka against dollar were 75.55-75.58 (previous 75.48-75.60) and Call Money Rates: 6.25-7.75 percent (previous 6.25-7.75 percent).
In the fourth Asian trade, euro edged higher, hovering near a one-month high hit on Thursday, with traders saying the currency could eke out more gains in the near term on short-covering, even if a sustained rally seemed unlikely. Australian dollar hit a three-week high as strong jobs data prompted investors to scale back expectations for a cut in interest rates in the near term, but the currency's rise stalled right at resistance in the $1.0235 to $1.0239 area. The yen inched higher as Japanese exporters sold dollars and cross/yen after dollar and euro both touched one-month peaks against yen Thursday.
In the final Asian trade, euro dipped but hovered above an intra-day low hit after S&P cut Spain's credit rating, and was on track for its biggest weekly rally since January after getting lifted by a flurry of short-covering.
The euro slipped 0.1 percent to $1.3770, having trimmed its losses after dipping to as low as $1.3723 following S&P's downgrade of Spain's credit rating to AA-minus. The move mirrored previous week's downgrade of Spain by Fitch.
S&P's downgrade of Spain came shortly after Fitch cut the ratings of UBS AG and placed several other European banks on credit watch negative.
The euro, however, was still up 2.8 percent this week, a gain that if maintained through Friday would mark the strongest weekly performance since mid-January.
Indian rupee strengthened on Friday, supported by strong domestic equities and a rise in euro that was triggered by views that European policymakers were inching closer to a plan to tackle the region's debt crisis.
The yuan closed up, slightly, against dollar due to bank clients' dollar purchases late in the session, but traders said investors trimmed their expectations of yuan appreciation in the near term amid renewed Chinese-US tensions on the currency front.
At the week-end, euro headed for its best week in nine months against dollar on optimism that European leaders would take bold steps to tackle the debt crisis, but a lack of concrete actions could limit further gains.
Group of 20 finance ministers and central banks' chiefs began a two-day meeting in Paris on Friday, a day after euro zone's 17 member nations completed their approval of the expansion of the region's bailout fund.
Hopes that officials would agree on the outlines of a plan in time for a European Union summit on October 23 boosted the euro. Discussions that China, India and other fast growing economies might bolster the capital base of the International Capital Fund to help rescue Greece further lifted the sentiment.
OPEN MARKET RATES: On October 10, rupee appreciated by 30 paisa versus dollar for buying and selling at 88.00 and 88.50. The rupee, however, lost 91 paisa in relation to euro for buying at Rs 119.76 and 90 paisa for selling at Rs 120.25.
On October 11, the rupee gained 20 paisa versus dollar for buying at 87.80 and 30 paisa for selling at 88.20. The rupee also picked up 67 paisa in relation to euro for buying at Rs 119.09 and 66 paisa for selling at Rs 119.59.
On October 12, the rupee picked up 20 paisa versus dollar for buying and selling at 87.60 and 88.00. The rupee, however, lost Rs 1.09 against euro for buying and selling at Rs 120.18 and Rs 120.68.
On October 13, the rupee gained 30 paisa versus dollar for buying and selling at 87.30 and 87.70. The rupee also picked up 55 paisa against euro for buying and selling at Rs 119.63 and Rs 120.13.
On October 14, the rupee picked up 10 paisa in terms of dollar for buying and selling at 87.10 and 87.60. The rupee also rose by 57 paisa against euro for buying and selling at Rs 119.06 and Rs 119.56.
On October 15, the rupee gained 30 paisa in terms of dollar for buying and selling at 86.80 and 87.30. The rupee, however, lost 83 paisa against euro for buying and selling at Rs 119.89 and Rs 120.39.