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With a selling pressure mounted by Lehman Brothers decision of filing for economic failure, Ringgit has an elevated opening against US currency. After closing down at 3.4525/4575, Ringgit was being traded against US dollar with 3.4475/4505, at 9 in the morning.

According to a dealer, the fall of US currency is caused by concern mounted by weakening of credit crisis across the globe, which includes struggle by American International Group and the purchase of Merrill Lynch by Bank of America.

Alan Greenspan, Former US Federal Reserve Chairman, said that it is likely that the crisis in financial market caused by fall of US subprime-mortgage market will lead to collapse of more such companies.

In morning, Ringgit was being traded at mix value with other major currencies. After a close of 2.4096/4153 on Monday, Ringgit fell against Singapore dollar as it touched 2.4103/4141. While in opposition to Japanese yen, it moved down from a previous value of 3.2988/3051 to 3.3038/3076

On the other hand, the currency witnessed an elevation against euro and pound sterling, as it went from 4.9260/9345 to 4.9020/9076 against euro and 6.2035/2135 to 6.1759/1830 against pound sterling.

It was said on Wednesday that as a part of their domestic operations the RBA (Reserve Bank of Australia) will be providing to take short-term deposits both from financial organizations and banks. Some of the analysts were of the view that this was intended at cleaning up of the extra overnight funds that the banks are having as they have stopped lending to each other and has deepened the hatred.

That has directed to a spike in term-money rates, particularly financial necessities for a time period of three months. Mr. Adam Carr who is a senior economist at ICAP gave a statement that Reserve Bank of Australia is making an effort to clear the extra cash to make sure that the overnight funds don’t fall short below the cash rate. Simultaneously there is an effort to make sure that the funding squeeze that is happening for about three months normalizes.

According to the announcement, American Federal Reserve will be opening all new foreign currency swap lines along with the central banks of Sweden, Norway, Australia, and Denmark. According to the Fed, the currency swap lines costing $30 billion each with the three banks were intended to normalize the money markets pressure. The Reserve Bank of Australia which maintained a distance from the coordinated approach by the international central banks to normalize the issue of short-term money markets was of the view that the new provisions for deposit taking will make an addition to already existing repurchase agreements.

It is evident that the first of these auctions for the deposit of fourteen days will take place on September 29th on Monday for making a settlement on September 30th Tuesday. The payable rate of interest on these deposits will be set as a margin to the cash rate of Reserve Bank of Australia and that margin probably might be negative one. Going according to Reserve Bank of Australia daily money market process acknowledge, bills of the banks, asset-backed commercial documents, government securities, certificate for the deposits etc.

As compared to the approximate cash shortage of A$611 million on Wednesday it managed to add A$814 million in repurchase agreements. All new insertion should help in making a balance with the commercial banks’ along with Reserve Bank of Australia approximately a record A$6.8 billion. In the previous week the central bank has been very kind with liquidity along with injecting big amount of money to normalize the universal credit issue. Off a seven week high of 7.48 percent on Tuesday, three month bank bill swaps rates were 7.44 percent but it still managed to stay over overnight cash rate of 7.0 percent.

On Tuesday, the money market showed some relaxation after a short time credit disorder, The Reserve Bank of Australia put lesser amount of funds than actually required. Going according to the regular money market process The Reserve Bank of Australia successfully added around A$3.715 billion in repurchase agreement as compared to the approximately cash shortage of A$3.832 billion. Now, this will maintain the commercial banks’ balances with Reserve Bank of Australia around A$6.5 billion and will also assist in cutting down rates for money market in the near future.

In the past week the central bank has been real kind with the liquidity, injecting heavy amount of money in order to reduce the problem of global credit. In Australia with the banks refusing to lend to each other in the middle of financial market problem, Interbank rates shoot up with the international counterparts. The rates for Australian money market has relaxed showing a sign of relaxation of the rates of overnight American dollar Libor.

On Tuesday, the rates for three month bank bill swap ticked down from the seven week high of 7.48 percent to 7.44 percent. But it is still quite high of the overnight cash rate of 7.0 percent. The dip witnessed the spreads involving three month bill price and three month overnight index swap rates ease. At the end of the last week, the swap which rushed to a record 94 basis points, it relaxed to approximately 87 basis points but in the beginning of the month it was quite high with 32 basis points.

The banks bill and OIS spreads shows an enthusiasm from the bank’s side that they are prepared to lend to each other along with wider spread that proposes hard conditions for lending. The investors across the world are looking at Interbank lending market like an indicator for broader market recovery. It is evident that the more time the rates of Interbank stay high, the more they will be working hard to stretch up the costs for both the consumer lending and cost of the trade.

The central banks are making their best efforts to put large amount of money in the banking system to keep away the impact of the international credit crisis. It is in the last week that the Federal Reserve injected heavy amount of funds and on the other hand European Central Bank organized a dollar auction on Monday, assigning $40 billion in overnight money at 3.24 percent which was lower from Friday’s 3.49 percent and Thursday’s 3 percent. This was followed by a move by Bank of Japan on Wednesday, where the bank is offering their first ever funding of the dollar.

British pound didn’t registered any major changes against the dollar prior to an industrial report that will be presenting that the mortgage sanctions witnessed an increase or not in Britain for the month of August. Yesterday, according to a statement given by Rightmove Plc which is Britain’s foremost website of property, the prices of the house came down a fourth month low in September. From the month of August the average asking price for a house also came down one percent. According to the British Banker’s Association, it is evident that 22,447 loans were given for the purchase of house in the month of July, which is down 64 percent earlier in the year.

According to Mr. Lee Hardman who is a currency strategist in London at Bank of Tokyo-Mitsubishi Ltd, the numbers might be a verifying factor for the low mortgage financing in Britain. The economic basics for the pounds are still very negative. At around 8:10 p.m. in London, the pound did a trading from yesterdays $1.8543 against euro at $1.8509. The currency of Britain snapped a three day drop, rising to 79.47 pence, from 79.67 pence.

Mr. Spencer Dale who is Chief Economist at Bank of England last week said that, in the future months the market of property probably will get weaker that could lead to problems for many families. With the downfall of the home prices and the issue of financial market reduced the company’s value, HBOS Plc decided to takeover Lloyds TSB Group Plc.

Yesterday in a statement given by Deputy Governor of Bank of England, Mr. John Gieve said that the news of inflation anticipation in Britain has been encouraging and the makers of the policies should concentrate on the deflationary affect on the credit crunch. According to the remarks it gives a silent message that Mr. John might favor the low rate of interest. Mr. David Blanchflower was the one from nine of the policy makers who voted for the rate cut in the month of September.

On September 4th the policy makers of Bank of England kept the rate of interest at five percent as they have evaluated the risk of increasing price rises along with the risk that increasing losses in the banks will push Europe’s largest economy to its first recession since the year 1991.

The yield on the two year note also registered a downfall of two basis points to 4.45 percent. The Debt Management Office of Britain is planning to auction 450 million pounds of 1.24 percent bonds those are inflations protected, maturing in 2055 today.

On Friday, Pakistani rupee came down to record low against the greenback. Many dealers blame the global financial crisis and weak economic fundamentals for the weakening of the rupee.

While the rupee was found trading at 78.15 rupees, it was cited down at 78.00/10 around noon. Pakistani currency had a previous day’s close at 77.65/75. Many believe that the central bank’s operation of buying/swapping has made market go short of dollars. Dealers say that with a commitment of selling dollars back, central back has been busy buying the currency in active market.

Any scope of intervention from central bank has been flattened down by the declining foreign currency reserves; also market is growing more anxious with fewer inflows from lenders. Dealers also believe that the concern in the market has been aggravated due to stress between Pakistan and US regarding the movement of US military in the Asian country.

Following the weakening balance-of-payments situation, Pakistani currency had lost nearly 21 percent against the American currency. According to information released on Thursday, the total foreign currency reserves of the country had gone down to $8.91 billion on September 13, which is around $190 million down from the previous week.

According to State Bank of Pakistan (Central Bank), it reserves went down from previous level of $5.72 billion to $5.52 billion. The bank also said that reserves in possession of commercial banks moved up a bit from $3.38 billion to $3.39 billion. After touching a record high with $16.5 billion last year, foreign reserves of Pakistan have been worn out by elevating oil import prices as well as withdrawal of money by foreign investors due to uncertainty in political scenario of the country.

In the first two months (July and august) of fiscal year of 2008/2009 the shortage in existing account grew to $2.572 billion, which is equal to 1.6 percent GDP or gross domestic product as compared to the yearly objective of 6.0 percent GDP.

According to analysts, the existing account for July and August is disturbing and actions to cut down imports are necessary. Compared to yearly objective of 12 percent for this economical year, August’s consumer price index moved up to 25.33 percent.

Maintaining the craving for high yielding currencies after the government of America declared a plan that will help in stabilizing worn out financial system, on Monday the Australian dollar witnessed a three-week high. In a week three-year Australian bond futures posted their major one day downfall with a loss of 0.22 points at 94.44 along with the ten year bond contract came down 0.254 points to 94.194.

With the investors came back to their trades, the Australian Dollar also increased as compared to the yen. The local currency was at 88.43 yen off at 89.78 which is a two-week high of 89.78, but up from 86.59 on Friday. It was around 4:10 p.m. that the Australian dollar was at $0.8299 as compared to American dollar, already raised to $0.8402 which was a three week high earlier.

On September 17th the Australian dollar came down to $0.7799 which was one-year low with the credit markets witnessed disorder of the carry trades. It also reduced the whole viewpoint of universal development and prices for the goods/services. On Friday the American Treasury moved to settle the financial markets, with a plan worth $700 billion for the purchasing of the bad mortgage related liabilities from various financial institutions. This also included American units of foreign banks in an attempt to stem the most awful financial crisis.

According to Mr. Joseph Capurso who is a currency strategist at Commonwealth Bank, risk hunger has been strengthened considerably on American news and with this the markets has been confident that a major upset may be saved. If the plans are accepted by the market then there are probabilities that this week we can witness a rise in the Australian dollar.

After the investment bank Lehman Brothers fell down the American package came up, the Federal Reserve gave $84 billion in help to American International Group and Treasury took over the mortgage leaders Fannie Mae and Freddie Mae. Morgan Stanley and Goldman Sachs also renounced their status of investment banking to be converted into bank holding companies those are controlled by American Federal Reserve for providing security in financial scarcity.

The Australian dollar also increased with the high prices of commodity along with the increase in oil prices which is stable over $104 a barrel and the gold with $867 per ounce. For the past few years Australia has been very good with the resources and is a big exporter of products/services. On Monday Australian Bureau of Agricultural and Resource Economics was of the view that both the iron ore and copper will be going ahead from its previous predictions.

On Monday, Morgan Stanley announced that a letter has been signed with objective of selling of 20 percent of the firm to Mitsubishi UFJ Financial Group Inc.

The firm did not disclose the financial terms of the deal. While the letter signed by the banks is said to be nonbinding, Morgan Stanley hopes to raise a price based on its book value following the completion of diligence review by the largest bank of Japan, if the deal is done.

The whole idea of the deal comes after the approval from fed to Morgan Stanley for becoming a bank holding firm. This major investment bank of Wall Street was allowed by Federal Reserve to become commercial bank in order to accept deposits. Now, this key firm of Wall Street will not be regulated by Securities and Exchange Commission anymore; instead will come under the Federal Reserve.

Morgan Stanley’s chairman and chief executive, John Mack, in a statement said that the deal would give opportunity to grow to both the banks as well as chance to make it big globally. He also added that the partnership would help the changeover of Morgan Stanley to a commercial bank as well as give a financial support to the firm in shoring its capital base in the time of credit crisis.

Past week has been busy with reports of sale of Merrill Lynch & Co to Bank of America, filing of bankruptcy by Lehman Brothers Holdings Inc and selling of Morgan Stanley.

Reacting to the government official’s proposal on Monday, the economists were of the view if any move is made to re-peg the Ringgit against the American dollar the Malaysian economy will have to suffer. The economists also added that if this got applied it would hurt the country’s export strength, it will also be affecting the investments, and it will also adjoin the factor of insecurity of the policies.

International Trade and Industry minister Muhyiddin Yasin was quoted by The Star Daily that a latest suggestion by the previous premier Mahathir Mohamad to re-peg the Ringgit should be reviewed. Mr. Yasin was of the view that all those mechanisms those were put into use in the earlier peg could be put into use again. Recently appointed Finance Minister Mr. Najib Razak will probably address a press meeting that was listed for midday local time Monday, but there was no statement made by the government of Malaysia.

The Ringgit was pegged at 3.79 by Mr. Mohamad’s management against American dollar to cut short the crashing currency of Malaysia. The peg was eliminated in the month of July 2005 and as far as the currency is concerned it has been trading in a ‘managed float’ ever since. At the last years end American dollar which purchased MYR3.399 now purchases MYR3.4159.

Though the economists were of the view that re-peg might be improbable, any proposal that the government was thinking of taking such a step will only be bringing a negative impact on Malaysia. According to an economist with a foreign bank-backed brokerage who wanted to keep his identity secret, in any case the government of Malaysia takes a decision to re-peg the Ringgit almost immediately after the de-pegging in the year 2005 will simply mean that they are themselves taking a step backward. He also added that at this point of time there is no need to have an excessively strong Ringgit as it will only affect the export spirits.

Giving his view on secrecy, an economist with a brokerage was of the view that re-pegging of Ringgit at any stage will only mean disturbing the whole practice of trading and generating a negative opinion for the officials of Malaysia. The present situation is totally different like it used to be in the year 1998. In a report JP Morgan was of the view that due to the break ups amongst the present management this move would be improbable and an obvious absence of consensus inside the current management.

The investors now had to face a new problem of re-pegging along with the political uncertainty and this will also disturb the local financial markets. A dealer was of the view that the stock market will also become a victim of re-pegging. The market response will probably be negative as with any limitations on the currency will only result in surrendering of the foreign funds.

On Tuesday, Federal Reserve left interest rate untouched at 2 percent and said that pressure and tension is mounting up significantly in the market. Also, Fed stressed on the need of keeping a check on the increasing pressure in the market, for need of an action when required.

Central bank had announced that it was not going to change its objective for federal funds rate, which is the interest charge on overnight loans by the banks. The rate remained untouched at 2 percent. Investors were sensing a rate cuts by Federal Reserve following the shock given by collapse of Lehman Brothers for not being able to find a buyer.

While Fed’s decision initial pushed down the stocks with Dow Jones industrial average shedding down by 100 points, but later on the situation changed. Investors realized that central bank was still positive and did not consider the economy was in a troubled state, which lead to rising of Dow Jones industrial average by 84 points.

Federal Reserve stated that there has been a significant increase in the stress in financial market as well as additional weakening of labor markets. On the other hand, central bank also showed concern regarding the stress of inflation. Fed announced that it is monitoring the economic development and changes closely and would take necessary measures or step to sustain the growth and prices as well as market stability.

While there had been anticipation of no arte cut by some economists, who were expecting an unchanged interest rate but also expected that Fed would indicate on a possible rate cut by indicating that the disturbance in the market has upset the stability of ‘downside risks to growth and the upside risks to inflation’. To which Fed said that the factor is of concern too.

Head of DMJ Advisors in Denver, David Jones, was not satisfied by the statement made by Fed and said that there is not hiding about downside risks to growth being overshadowing risks of inflation. David said that there are still chances of central bank implementing a rate cut of two quarter-point by the end of the year, if the disturbances in the market resulted in a growth weaker than expected by Fed.

The announcement by Fed to leave the key rates untouched came at the time when it injected $70 billion into financial system within the additional reserves. Fed performed it in its usual open market procedures that are managed by New York regional bank of Fed. It also marked this year’s first Fed meeting at the time when there hadn’t been any oppose from officials of Fed, regarding the lack of focus on inflation by central bank.

Before this meeting was held there had been dissents from president of the Dallas regional Fed bank, Richard Fisher. He had opposed for fives times consecutively. In last two meetings when the interest rates were left untouched by Fed, Richard had argued that there is a need to increase rates to handle increasing inflation pressures.

On Wednesday, rupee weakened with banks buying greenback in order to arbitrage in offshore trade. Strike by the workers of state bank affected the trade and kept the volume low.

Rupee was 0.2 percent low with 45.81/83 a dollar at 10.30 am, after a close of 45.72/73 of Tuesday. According to a dealer, with strike at state banks causing low volumes the currency is likely to stick to 45.70/45.95 level. He also said that offshore trade is also exerting pressure on the Indian currency.

To cash the price differential, dollars are purchased by banks from local markets to offshore side.

On Wednesday, failure of talks between chief labor commissioner and the union resulted in declaration of strike by the employees working at Indian public sector bank. The union and the commission were trying to discuss demands for delay stake sales in the banks and salary increase.

It is expected that the $700 billion rescue plan for financial market proposed by United States might edge down the gains at Sensex, which opened 0.5 percent up. According to dealers, rupee could low if oil companies demanded for dollar.