Persistent demand for dollars pushed the rupee lower versus dollar on the currency market during the week ended on January 8, 2011. On the interbank market, the rupee dropped 15 paisa in relation to dollar for buying at 85.75 and 12 paisa for selling at 85.77.
On the open market, the rupee moved both ways as it maintained its level for buying at 85.70 and shed 10 paisa for selling at 85.90. The rupee, however, gained sharply by Rs 2.80 in relation to euro for buying and selling at Rs 110.10 and 110.60 as the single European currency hit lowest level on worries about euro zone.
The rupee commenced the new year 2011 on a happy note against dollar, but in the middle sessions it started losing due to higher demand for dollars by importers. In the absence of positive fundamentals, it would be very difficult for the rupee to hold its firmness versus dollar. Consistency in the economic policy and early improvement on political front are main factors which would help the foreign investors to improve their confidence.
According to the State Bank of Pakistan (SBP), the country's foreign exchange reserves rose to a record 17.20 billion dollars in the week ending on January 1, 2011, up from 16.42 billion dollars of previous week.
INTER-BANK MARKET RATES: On Monday, the rupee shed 8 paisa versus dollar for buying at 85.68 and 85.72.
On Tuesday, the rupee shed two paisa in relation to dollar for buying at 85.70 and three paisa for selling at 85.75. On Wednesday, the rupee shed four paisa in relation to dollar for buying at 85.74 and three paisa for selling at 85.78.
On Thursday, the rupee inched up by one paisa in relation to dollar for buying at 85.73 and selling at 85.77.
On Friday, the rupee lost three paisa against dollar for buying and selling at 85.76 and 85.80, they said. On Saturday, rupee inched up one paisa against dollar for buying at 85.75 and three paisa for selling at 85.77.
OVERSEAS OUTLOOK FOR DOLLAR VS MAJOR CURRENCY UNITS: In the First Asian trade, the euro fell against dollar in the first trading session of 2011, giving back most of the gains it made late last week when it surged on short-covering in thin, year-end trade.
Indian rupee treaded water as a broad rise in dollar against major currencies was offset by gains in shares and other Asian peers. By 10:20 am (0450 GMT), it was at 44.69/70 per dollar. It moved in a tight range of 44.6725-44.78. Malaysian ringgit was trading at 3.064 versus dollar.
In the second session, the dollar edged broadly higher with the yen on the back foot after upbeat US data suggested that the world's biggest economy would accelerate in 2011.
The Australian dollar came under pressure, with traders citing worries about the massive floods in the country's north-east, which has severed roads and closed ports, curtailing production of coal, Australia's top export.
The euro eased slightly after last week's short-covering surge, with some traders citing talk of euro-selling by investors related to euro zone bond redemptions. Malaysian ringgit was available at 3.0625 in relation to dollar and Indian rupee was at 44.82, while Chinese yuan was tradng at 6.604.
In the third Asian trade, the dollar held firm, bolstered by further evidence that US economic recovery was becoming self-sustaining, while a correction in high-flying commodity prices pressured the Australian dollar.
Market players said the dollar's rise and a drop in commodities during the week was driven by position unwinding, with investors trimming back some of the bets made before the year-end. Indian rupee dropped to its lowest level in more than a week on Wednesday as dollar climbed broadly against major currencies and Asian peers, while a shaky shares added to the downbeat mood. At 10:22 am (0452 GMT), it was at 45.20/21 per dollar, after hitting 45.26, its weakest since Dec 27 and 0.5 percent below its close of 44.98/99 on Tuesday. Malaysian ringgit was trading at 3.0645 in terms of dollar and Chinese yuan was available at 6.620.
In the fourth Asian trade, the dollar held steady against yen and euro, maintaining overnight gains. It took a breather against yen after rallying 1.5 percent on Wednesday for its biggest one-day rise in more than three months, as dollar selling by Japanese exporters tempered the rally.
The euro eased slightly to $1.3141, hovering near trendline support at $1.3110, with another possible downside target lurking at $1.3081, the euro's 200-day moving average. Indian rupee was available at Rs 45.32 versus dollar, Malaysian ringgit was trading at 3.0705, and Chinese yuan was at 6.6246.
In the final session of Asian trade, euro dropped to a four-month low versus a broadly firmer dollar on Friday ahead of US jobs data, which was expected to provide more evidence of a stronger US economic recovery.
A sell-off in peripheral euro zone government bonds before a flurry of supply the following week and an EU proposal that could force those who lend to banks to bear big losses should they fail helped knock the single currency lower.
The euro extended losses after sliding more than 2 percent over the two previous days and briefly dipped below support at the $1.2970 area - lows hit in late November and early December.
Indian rupee was trading at Rs 45.24 versus dollar and Malaysian ringgit was available at 3.0670, while Chinese yuan was at 6.6283.
At the week-end, the euro hit its lowest level against dollar in nearly four months on worries about use of euro zone peripheral country bonds as collateral and a drop in the US unemployment rate.
It has been a rough 2011 so far for euro which fell 3.3 percent against dollar, positioning it for the worst weekly loss in 6 weeks.
The dollar initially gave up gains against euro after disappointing US job creation data. It recovered as traders saw a dip in the US unemployment rate supporting a stronger outlook for the greenback.
Talk the Swiss National Bank had excluded from eligibility the use of Portuguese bonds as collateral for bank loans weighed on the euro. Fears persisted even after the Swiss National Bank said that was not the case.
A total gross funding amount of 20-22 billion euros of issuance by Germany, the Netherlands, Italy, Spain and Portugal is set to hit the primary market next week, according to Norbert Aul, European rates strategist at RBC Capital Markets in London.
"This amount should feature the first real test of how peripheral EGB (European government bond) supply will be digested by the market in 2011," he said.
In terms of peripheral bond issuance, next week will reveal Portugal's funding capabilities at the capital market on Wednesday, while Spain and Italy will make their primary EGB market debut for 2011 on Thursday.
OPEN MARKET RATES: On January 3, the rupee lost 10 paisa versus dollar for buying at 85.60 and five paisa for selling at 85.75. The rupee, however, gained 45 paisa versus euro for buying and selling at Rs 113.45 and Rs 113.95.
On January 4, the rupee lost 5 paisa in terms of dollar for buying at 85.65 and five paisa for selling at 85.80. The rupee shed 55 paisa in relation to euro for buying and selling at Rs 114.00 and Rs 114.50.
On January 5, the rupee slipped by five paisa against dollar for buying at 85.70 and 10 paisa for selling at 85.90. The rupee, however, gained 90 paisa versus euro for buying and selling at Rs 113.10 and Rs 113.60.
On January 6, the rupee maintained its overnight levels versus dollar for buying and selling at 85.70 and 85.90. It gained Rs 1.20 in relation to euro for buying and selling at Rs 111.90 and Rs 112.40.
On January 7, the rupee maintained its overnight levels in relation to dollar for buying and selling at 85.70 and 85.90, while it rose Re one in terms of euro for buying and selling at Rs 110.90 and Rs 111.40.
On January 8, the rupee maintained its overnight levels in relation to dollar for buying and selling at 85.70 and 85.90, while it surged 80 paisa in relation to euro for buying and selling at Rs 110.10 and Rs 110.60.