Tuesday June 16, 2009

KARACHI: The currency market on Monday welcomed the new budget as the rupee depicted firm trend against both the dollar and the euro, dealers said. The rupee gained 10 paisa in relation to dollar on the interbank market for buying and selling at 80.95 and 81.00, they said.

Explaining the impact of new measures of the 2009-10 budget on money circulation, they said that withholding tax on commercial imports has been raised to 4 percent from 2 percent. This factor may be a hurdle in achieving the government's claim of bringing down inflation rate and the interest rate to single digit.

It was announced in the budget speech that inflation decreased from 25 percent to 14 percent and present interest rate is 14 percent. The State Bank of Pakistan (SBP) cut its discount rate on 20 April, 2009, the key policy rate by 100 basis points to 14 percent for the rest of the fiscal year ending on June 30, On that occasion, the State Bank of Pakistan Governor Salim Raza had said that inflation was expected to come down to 8 percent by next year.

In the first Asian trade, the dollar rose broadly as investors took profits on other major currencies, which had climbed to multi-month highs on hopes for a recovery in the global economy.

Some traders said a cautious tone from policy makers who gathered at a Group of Eight finance ministers meeting on the weekend helped temper recent optimism about the economy, encouraging bets in riskier assets to be cut further. Commodity currencies, including the Canadian and Australian dollars, also fell after sharp gains this week in tandem with a drop in oil prices, and as G8 finance ministers prepared to meet in Italy.


(BRecorder)

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Tuesday, June 16, 2009

TOKYO: The dollar and yen rose against the euro in Asia on Tuesday on renewed risk aversion after weak US and European data raised fresh doubts over the pace of global economic recovery, dealers said.

The euro dropped to 1.3769 dollars in Tokyo morning trade from 1.3793 in New York late Monday, and to 133.93 yen from 134.92. The dollar fell to 97.30 yen from 97.83. The greenback and yen gained ground following the release of data from Western economies which raised "doubts over the speed and timing of the global recovery," NAB Capital strategists wrote in a note.

The dollar and yen have been the preferred safe-haven currencies since last year's market meltdown, although the greenback has recently gained more on hopes America will make a quick exit from its recession.

The euro has meanwhile taken a beating due to weak employment data in the eurozone and worries that the region's crisis-hit banks will suffer bigger-than-expected write-downs, dealers said.

"Risk appetite is retreating. Eurozone risks remain high," Societe Generale forex chief Yuji Saito told Dow Jones Newswires.

The European Central Bank "spooked investors with its estimates of credit crisis related write-downs," wrote NAB Capital analysts.

The ECB estimates lenders' potential write-downs related to toxic assets and soured loans to total 649 billion dollars from the 2007-2010 period, much more than the 366 billion dollars forecast previously.

The International Monetary Fund has forecast the full amount could come to 900 billion euros.

The 16-nation eurozone is in the midst of a recession which is the worst for some members since World War II. Employment in the region fell 1.2 percent in the first quarter of 2009 from a year earlier, data released Monday showed.

Investors will keep a close eye on the release later Tuesday of Germany's ZEW business sentiment survey, which measures the confidence of financial market players.

Meanwhile US data for June undermined recent optimism for "green shoots" of recovery in the world's biggest economy.

The NAHB housing index was below market expectations while factory activity in the New York area fell at a faster pace than in May, according to the Federal Reserve Bank of New York's Empire Manufacturing Survey.


(AFP)

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Monday, June 15, 2009


KARACHI: Borrowing by output-oriented private sector, which amounted to as much as Rs 384 billion during the first 11 months of FY08, plummeted to under Rs 14 billion during FY09 to May 30, showing a gap of about Rs 370 billion in credit utilisation over the corresponding period of last year.

The incremental growth of private sector credit in FY08 over FY07 had worked out to well over 15 percent, whereas the growth in FY09 over FY08 worked out to less than even 0.5 percent.

The figure did not look adequate enough even to meet the financial requirements of the least sophisticated agriculture sector, what to talk of other more capital-hungry sectors The abnormally low off-take of credit by the private sector during FY09 so far naturally translates into a (yet to be finalised) 2 percent economic growth for the year--the lowest in the last three decades.

The other segment of the corporate sector, namely the public sector enterprises or PSEs, however, utilised abnormally large chunk of credit, amounting to some Rs 145 billion during FY09 to May 30 as against less than Rs 61 billion in the corresponding period of FY08 and much less than this in previous years.

Detailed data available up to March 2009 showed that even bulk of the total was utilised by minor PSEs as against the autonomous five production and services giants. Who knows whether they borrowed this huge amount to meet their production needs or non-developmental spending.

Among other developments, as in the previous few weeks, surge in government borrowing for commodity operations continued through the week ended on May 30, 2009 with wheat procurement continuing in full swing from a bumper crop. Borrowing for the purpose rose from Rs 178 billion at the end of previous week to over Rs 191 billion at the end of current week, showing an increase of Rs 13 billion over the week. In a previous review, we had explained in detail the factors leading to the present surge.

In the meanwhile, government borrowing for budgetary support declined by Rs 24 billion to about Rs 321 billion during the week while in the previous week such borrowing had increased by Rs 13 billion. At its present level, budgetary borrowing from the State Bank amounted to Rs 159 billion (showing a decline Rs 39.5 billion over the previous week), while borrowing from the scheduled banks amounted to Rs 162.5 billion (showing an increase of about Rs 15.5 billion over the previous week).

Last year, in the corresponding period, the government had borrowed Rs 364.5 billion for budgetary support and that too entirely borrowed from the central bank while the scheduled banks actually happened to have retired some Rs 198 billion.

The secret of declining government borrowing from the banking system (the central bank plus the scheduled banks) this year lay in the massive recourse to borrowing from the non-bank sector through NSS which is reported to be contributing about Rs 2 billion daily to the government kitty.

It is estimated that government borrowing from this source could reach to Rs 250 billion in FY09 compared with an average of Rs 54 billion during the preceding three years. Though borrowing from the non-bank sector is considered to be the least inflationary, compared with borrowing from the central bank (highly inflationary) and scheduled banks (less inflationary than the central bank), it carries a heavier debt service burden because of very high returns offered on NSS paper.

Besides above developments on the monetary scene, OINs of the banking system contributed to a net contraction of some Rs 47 billion in money supply during the week while NFA of the banking system contributed to a net expansion of Rs 21.5 billion in it.

All said, incremental money supply during the week increased by Rs 47.6 billion to Rs 303.8 billion or 6.48 percent and consisted of about Rs 190 billion in terms of currency in circulation and over Rs 113 billion in deposit money besides other deposits with the State Bank which are of the nature of money.


(BRecorder)

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KARACHI: The rupee, despite being under pressure due to heavy payments by importers, somehow managed to reduce losses against dollar during the week ended on June 13, 2009. On the interbank market, the rupee lost 30 paisa against dollar for buying and selling at 81.05 and 81.10.

On the open market, the rupee followed same trend, shedding 10 paisa versus dollar for buying and selling at 81.00 and 81.20, and losing 50 paisa in relation to euro for buying and selling at Rs 113.00 and Rs 114.00. High demand for dollars made the rupee unable to keep its level firm versus both the US and European currencies. It looked that the rupee would not retain its firmness in the near future due to importers' hectic buying to clear payments yet it may resist sharp losses. According to State Bank of Pakistan (SBP) weekly data, foreign exchange reserves were down by 9.8 million dollars to 11.5 billion dollars.

INTERBANK MARKET RATE: On Monday, the rupee, despite being under pressure due to heavy payments before the end of the outgoing fiscal year, gained five paisa against dollar for buying and selling at 80.75 and 80.80. On Tuesday, strong demand for dollars pushed the rupee down which lost 25 paisa for buying and selling at 81.00 and 81.05.

On Wednesday, the rupee drifted lower by 5 paisa in terms of dollar for buying and selling at 81.05 and 81.10. On Thursday, the rupee managed to gain 25 paisa against dollar for buying and selling at 80.80 and 80.85. On Friday, the rupee dropped sharply by 20 paisa versus dollar for buying at 81.00 and 17 paisa for selling at 81.02. On Saturday, the rupee shed five paisa versus dollar for buying at 81.05 and 8 paisa for selling at 81.10.

OVERSEAS OUTLOOK FOR DOLLARS: In the first Asian trade, the dollar rose against a basket of currencies extending sharp gains made late last week as US Treasury yields rose to seven month highs, prompting investors to cover short-dollar positions.

Smaller-than-expected job losses in the United States in May sparked concerns on Friday that the Federal Reserve may lift interest rates sooner than previously thought, helping push up Treasury yields. In the second Asian trade, the dollar rose against a basket of currencies but stayed below a two-week high scaled after US jobs data last week stoked expectations for a Federal Reserve rate rise later this year.

The euro dipped but stayed above lows hit on Monday, when ratings agency Standard & Poor's cut Ireland's sovereign credit rating to AA, its second downgrade in three months.

Amid third Asian trade, the dollar was steady against a basket of currencies after sliding the previous day when investors questioned whether the economy had improved enough to justify talk of a Federal Reserve rate hike by the year-end. The dollar rose against the yen as traders cited regional players actively covering short positions with Asian shares extending gains in early trade.

In the fourth session of the Asian trade, the dollar fell against a basket of currencies, paring some gains made after the benchmark US Treasury yield hit its highest point in eight months the previous day.

In the fifth session of the Asian trade, the dollar was steady against other major currencies after falling the previous day when improved US labour market and retail sales figures boosted optimism about the economy, eroding the dollar's allure as a safe haven.

At the week-end, the US dollar rose broadly in New York, rebounding from a sell-off earlier this week, while demand for the euro fell after data showed a plunge in euro zone industrial production. The US dollar is likely to extend this week's drop in the trading week ahead as economic data fails to convince investors the US economy is recovering fast enough to warrant demand for the greenback. Despite a rally on Friday, this week's record auction of $65 billion of Treasury debt and burgeoning fears of inflation are also prompting investor caution on the dollar as they feel they are in uncharted waters regarding US fiscal policy.

Rhetoric about finding a new global reserve currency to challenge the greenback is another slight weight on the dollar before a meeting in Russia of BRIC nations Brazil, Russia, India and China.

OPEN MARKET RATES: On June 8, the rupee shed 10 paisa in terms of dollar for buying at 80.90 while it did not show any change for selling at 81.10. The rupee managed to hold the weekend levels versus euro for buying and selling at Rs 112.50 and 113.50.

On June 9, the rupee managed to hold its overnight levels against dollar for buying and selling at 80.90 and 81.10. The rupee managed to gain Re one in relation to euro for buying and selling at Rs 111.50 and 112.50. On June 10, the rupee shed 5 paisa against dollar for buying and selling at 80.95 and 81.15. The rupee shed Rs 1.60 versus euro to Rs 113.10 and Rs 114.10.

On June 11, the rupee inched up 5 paisa in relation to dollar for buying and selling at 80.90 and 81.10. The rupee adopted the same pattern versus the euro, gaining 60 paisa for buying and selling at Rs 112.50 and Rs 113.50.

On June 12, the rupee shed 5 paisa for buying against dollar for buying at 80.95 while it did not show any change for selling at the overnight level at 81.10. The rupee, however, lost 50 paisa for buying at Rs 113.00 and 114.00. On June 13, the rupee was down by 5 paisa against dollar for buying 81.00 and 10 paisa for selling at 81.20. The rupee rose 30 paisa in relation to the euro for buying and selling at Rs 113.00 and Rs 114.00.


(BRecorder)

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