Weekly Review: Rupee versus Dollar

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Observer Report

Karachi—Trading activity in the local currency market was reduced to two sessions during the last week, as the market remained closed on account of Eid holidays from September 12-14. Trading resumed on Sept 15, the market observed a mounting demand for dollar, exerting a downward pressure on the rupee in the opening session due to a prolonged closure of the market. In international trade, the dollar weakened versus most of its major peers as wholesale inflation stayed unchanged last month, while industrial production fell more than projected, reducing the central bank’s scope to tighten policy.
Sterling traded flat against the dollar after recording its first week of losses in four, as investors awaited comments from Federal Reserve officials for further clues on whether US interest rates will be hiked soon. On the interbank market, it posted 28-paisa loss over last closing level of Rs104.35 and Rs104.37 before receding to almost a week low at Rs104.63 and Rs104.65 against the dollar. The rupee closed the week at Rs104.61 and Rs104.63, gaining two paisas against the dollar.
Against the dollar on the interbank market, the rupee hit its highest level on Sept 9 and its lowest level on July 4, this year. In the open mark, the rupee/dollar parity followed a similar trend in line with the interbank market. In overseas trade, on the other hand, the dollar rose against major currencies after remarks by Federal Reserve policymakers helped boost investor expectations of a near-term increase in US interest rates. In the last trading session, the rupee/dollar parity did not show any change and the rupee closed the week against the dollar flat at Rs105.00 and Rs105.20 as movements in major currencies in overseas trade were confined to relatively narrow ranges against the dollar in the final session.
The dollar, however, gained 10 paisas against the rupee in the open market last week. Amid sharp variations, the dollar in the open market has traded against the rupee between the high of Rs106.20/40 and the low of Rs104.60/80 in the three months to September so far. It hit its highest level on Aug 13 and its lowest level on Sept 5, this year. Against euro, the rupee variation in tight ranges continued during the week that was shortened by three sessions.
In the final session, the rupee downslide persisted against euro for the second straight day. It shed 10 paisas against the euro before closing the week at Rs116.70 and Rs118.20. The rupee thus lost 40 paisas against euro on week on week basis. In the last three months so far, the euro has traded in broad ranges amid sharp fluctuations against the rupee, hitting its highest level at Rs119.40 and Rs120.40 on Aug 18 and its lowest level at Rs115.30 and Rs116.30 on July 29, this year.