A man looks at a rate list at a currency exchange bureau
The euro dropped below parity to the dollar overnight as more worries pile up for eurozone. Image Credit: AP

Dubai: On a day when dollar power is in ample evidence, the Indian and Pakistani rupees either remained unchanged or moved in a narrow range.

The rupee was holding at 78.87 to the dollar for the most part (or Dh21.74 to dirham, while the PKR was lower at 217.50, a marginal decline from the 215-plus position overnight.

“It was expected that INR would come under strain from the dollar’s gains – but it’s been rock steady right through the day’s sessions,” said an FX analyst. “The PKR too has been, in the current climate, held its ground.” (A further boost for the Pakistan economy and the PKR has been Qatar’s announcement of a $2 billion credit facility. The South Asian economy is also expecting the IMF funding release to come in soon.)

On the INR, Krishnan Ramachandran, CEO of Barjeel Geojit Financial Services, said: “Stable oil prices, an increase in foreign investor inflows, monetary interventions by RBI, favorable macro-economic growth indicators are all likely sustain the rupee at around 79.90–80.10 levels in the near term.” (The lowest point so far for the INR was 80.06 – or 21.79 to dirham - on July 18.)

The bad news, however, has been reserved for the euro and the UK pound. The euro had dropped below dollar parity overnight and continues to struggle at 0.9918 to the dollar. The euro’s problems are not going to be over soon.

Krishnan Ramachandran

High inflation in eurozone, a slower pace of interest rate hikes compared to the Fed., increased cost of imports accompanied by a lower domestic demand, and the direct impact of the Russia-Ukraine stand-off are reasons for euro to reach close to parity

- Krishnan Ramachandran, CEO of Barjeel Geojit Financial Services

The euro’s high point this year was on February 22, at 1.1455 to the dollar.

Pound drops

“The UK pound is at its lowest point this year at 1.1765 and well below the 1.3589 of February 22, and the highest point,” said a senior treasury analyst. “The euro and the pound are the obvious ones facing the full might of the dollar in these 24 hours.”

For euro, will it be more bad news?
“The EUR-USD sank below parity, even before the print of the PMI figures, which will show that the economic activity in Europe is slowing to a point that the ECB cannot start hiking rates at the same speed than the Fed.

“Even if it did, it wouldn’t really bring inflation down, knowing that most of the European inflation problem is triggered by the skyrocketing energy prices. Instead of hiking the rates by more than necessary, Christine Lagarde would better beg Putin to restore the energy supply to Europe.”

- Ipek Ozkardeskaya of Swissquote Bank