THE RUPEE: sharp gains versus dollar

KARACHI (October 11 2010): The rupee managed to recover most of the gains against dollar on currency market during the week ended on October 8, 2010. On the interbank market, the rupee recovered 33 paisa versus dollar for buying at 85.88 and 32 paisa for selling at 85.92.On the open market, the rupee posted a gain of 60 paisa in relation to dollar for buying and selling at 85.80 and 86.00. It, however, fell in relation to euro, losing 34 paisa for buying and selling at Rs 118.26 and Rs 118.76, as the single European currency went up sharply in the world markets, though it managed to shed some of its losses at the end of the week.But, under the circumstances, the rupee may not be able to retain its value in terms of dollar as the trade gap widened by 22.2 percent in the first quarter of current fiscal year 2010-11.If dollar supply improves, it could be expected that the rupee may limit its losses or resist fall versus dollar.According to State Bank of Pakistan’s (SBP) weekly data, the country’s foreign exchange reserves rose to a record 16.99 billion dollars in the week ending October 1, 2010, up from 16.79 billion dollars in the previous week.INTER-BANK MARKET RATES: On Monday, the rupee inched up by one paisa in relation to dollar for buying at 86.20 and two paisa for selling at 86.24.On Tuesday, the rupee rose by 8 paisa in relation to dollar for buying and selling at 86.12 and 86.16.

On Wednesday, the rupee was sharply higher by 14 paisa in relation to the greenback for buying and selling at 85.98 and 86.02. On Thursday, the rupee maintained its rise against dollar, gaining 14 paisa for buying at 85.84 and 15 paisa for selling at 85.87.On Friday, the rupee lost four paisa for buying against dollar at 85.88 and five paisa for selling at 85.92.OVERSEAS MARKET OUTLOOK FOR DOLLARS: In the first Asian trade, the dollar surged higher in a short-covering rally against yen, which retreated against other currencies as investors unwound some long yen positions ahead of a Bank of Japan (BoJ) policy meeting later in the week.Few saw surprises from the BOJ meeting, which was to end on Tuesday, with expectations that policy makers would extend a cheap fund-supply tool to help shore up the economy.The Indian rupee strengthened to its highest level in more than five-and-half months, supported by sustained foreign portfolio investments and gains in other regional peers. At 10:25 am (0455 GMT), it was at 44.31/32 per dollar, after hitting 44.2525, its highest since April 15 and 0.4 percent above Friday’s close of 44.47/48.Interbank buy/sell rates for the taka against dollar: 70.5450/70.5500 (previous 70.55/70.55); Call Money Rates: 3.75-6.00 percent (previous 3.50-6.50 percent).In the second Asian trade, the yen fell after the Bank of Japan unexpectedly trimmed its rate target and launched a fund to buy assets, while the Australian dollar tumbled after Australia’s central bank surprised by not raising rates.

The yen had softened ahead of the Bank of Japan decision, with a newspaper reporting that it would consider expanding its asset purchases, but the decision still surprised the market.Interbank buy/sell rates for the taka against dollar: 70.5150/70.5200 (previous 70.5450/70.5500); Call Money Rates: 3.75-6.00 percent (previous 3.75-6.50 percent).Indian rupee was trading at Rs 44.58 versus dollar; Malaysian ringgit was available at 3.1005; and Chinese yuan was available at 6.6905 in terms of the greenback.On Wednesday, the dollar stayed near eight-month lows on euro and edged towards a 15-year trough on yen, hurt by expectations of Federal Reserve easing after Japan lined up its own reflation tools. Adding to speculation that the Federal Reserve would resume quantitative easing possibly as soon as its November policy meeting, Chicago Fed President Charles Evans was quoted as saying that the central bank should do much more to spur the economy.The dollar was less than half a yen above September’s 15-year low of 82.87 yen, supported by jitters that Japanese authorities could intervene again if it retested that level, after last month’s yen-selling intervention.

Indian rupee strengthened to its highest level in nearly six months, as foreign banks and exporters sold dollars, tracking gains in local shares which fuelled expectations for further capital inflows. At 10:50 am (0520 GMT), it was at 44.34/35 per dollar, after hitting 44.25 in early deals, its strongest since April 15 and 0.8 percent above Tuesday’s close of 44.69/70.In the fourth Asian trade, the dollar was mired near a 15-year low versus yen and an eight-month low against euro on the spectre of more money-printing by the US Federal Reserve as early as next month.The dollar is on the verge of sliding to a 27-year low against the Australian dollar, which shot up after surprising strength in the job markets revived talk of a rate hike by the Reserve Bank of Australia.The rupee strengthened buoyed by dollar’s losses versus major currencies overseas, but profit-taking in domestic shares after a surge could limit the Indian unit’s gains. By 10:50 am (0520 GMT), the rupee was at 44.34/35 per dollar, 0.3 percent stronger than 44.49/50 at close on Wednesday, when it had hit 44.25 in early deals – its strongest since April 15.

Malaysian ringgit was trading at 3.1000 versus the dollar. In the final session, the dollar came under pressure again, losing some ground made from a bout of profit-taking on other currencies ahead of US jobs data and Group of Seven (G7) and IMF meetings later in the week.The Japanese yen held near its 15-year peak against dollar as traders started to feel that Japan may not intervene for now – at least not as aggressively as it did last month – to keep yen’s gains in check.Indian rupee was trading at Rs 44.20 versus the dollar; Malaysian ringgit was available at 3.0980; and Chinese yuan was trading at 6.6707 in relation to greenback.OPEN MARKET RATES: On October 4, the rupee rose by five paisa in terms of dollar for buying and selling at 86.35 and 86.55. The rupee also gained 57 paisa in terms of euro for buying and selling at Rs 117.35 and Rs 117.85.On October 5, the rupee appreciated by 10 paisa against dollar for buying at 86.25 and 15 paisa for selling at 86.40. The rupee, however, fell sharply versus euro, losing 61 paisa for buying and selling at Rs 117.96 and Rs 118.46.

On October 6, the rupee appreciated by 15 paisa versus dollar for buying and selling at 86.10 and 86.25. The rupee, however, continued its slide in relation to the euro, falling 30 paisa for buying and selling at Rs 118.26 and Rs 118.76.On October 7, the rupee picked up 15 paisa versus dollar for buying at 85.95 and 10 paisa for selling at 86.15. The rupee, however, extended its fall in relation to euro, losing 87 paisa for buying and selling at Rs 119.13 and Rs 119.63.On October 8, the rupee gained 15 paisa versus dollar for buying and selling at 85.80 and 86, and it gave up its overnight weakness in relation to euro, gaining 87 paisa for buying and selling at Rs 118.26 and Rs 118.76 – Brecorder