Euro's Currency Chart Dilemma
Though the euro currency chart commenced its journey during the first week of January 2007, on the expectations of some revival in the ailing economy of the country however this tempo could not be maintained during the remaining weeks of the month.
The welcome feature of the first week of the month under review was that the rupee, which was losing ground for several weeks managed to recover 35 paisa versus the US dollars which were flowing in from the Mideast, Saudi Arabia and other countries with Pakistanis coming home to celebrate Eid which caused available a plenty of dollars in the market.
Speculators were piling up dollars for the last few weeks on hopes that the rupee would be devalued but the State Bank burst the bubble by denying any possibility of devaluation at least in near future forcing them to push a good quantity of dollars for disposal in the market. But the scenario was changed during the second week of the month when the rupee wrapped the week up with a series of setbacks, cumulatively losing 44 paisa against the US dollar and reached around Rs.46.63, the highest of the month, amid mounting speculations about another downward adjustment. Some leading Forex dealers have attributed the weak position of rupee to the demand for dollars in the corporate sector.
However, the rupee scrambled to stay firm against the majority of the currency units at the foreign exchange counter, particularly during the third week of January, 2007 and was appreciated by 43 paisa in the kerb, though many of such currencies were weakened against the greenback and speculators were betting for a downward adjustment of the rupee to keep the exports competitive. The State Bank of Pakistan tried but vainly to dismiss the rumors of devaluation. The Prime Minister himself had to come out to counter the rumors of devaluation. He said that there would be no mini budget; similarly there was no point in speculating about any more devaluation of the rupee. He was confident that Asian chaos would not affect the country as some measures had already been taken to face the crisis. Finance Minister has also said that economic indicators in the first half of the year have stayed within IMF targets and hopefully the quarterly review would endorse this. He said that though below budgetary estimates, the economy would post 5 to 5.5 per cent GDP growth well within IMF target. But despite the foregoing favorable factors, the State Bank of Pakistan's report on the state of the economy during the second quarter of 2006-07 showed that the investment climate in the country was not favorable while financial position of the public sector enterprises continued to remain weak, The report apprehended that the annual economic growth rate would not meet the largest of 6 per cent and would remain in the vicinity of 5 per cent. The reasons for economic setback listed by the SBP include among other things: less than expected cotton crop and the continued sluggish production in the large scale manufacturing sector in the first half of the year. Moreover, there was considerable shortfall in the collection of revenue, both in relation to the historical trend as well as the target for the whole year.
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