With no major development in the inter-bank market, the rupee-dollar parity ruled in a tight range last week. Demand for dollar remained stagnant while its supply improved further.

The rupee opened the week unchanged, trading against the dollar, at Rs60.10 and Rs60.12, on May 27. A moderate demand for dollar on May 28, however, pushed the rupee down 2 paisa against the dollar to trade at Rs60.12 and Rs60.14. On May 29, the rupee was unchanged for buying but lost 1 paisa for selling to trade at Rs60.12 and Rs60.15, amid slow activity. However, with the emerging corporate demand for dollar on May 30, the rupee shed a modest 3 paisa for buying and 2 paisa for selling at Rs60.15 and Rs60.17 against the dollar. Thus in four days trading it lost 5 paisa against the dollar.

On May 30, dollar selling by some local and foreign banks restricted a fall in the rupee, which staged a recovery over the overnight level and gained 2 paisa to trade at Rs60.13 and Rs60.15 at close, bringing cumulative fall of 3 paisa during the week.

Against other major currencies, the rupee at the inter-bank forex counter, lost ground versus most American, European and Asian currencies, while it was stable against the Middle Eastern currencies. The rupee was showing strength over British currencies since past few weeks, it, however, weakened against the pound this week. Its weakness over euro, Canadian, Australian, New Zealand and Singapore dollars, Swiss franc, Sweden krona, Norwegian and Danish krones, Japanese yen and the Kuwaiti dinar extended further. The rupee, however, remained unchanged against the Saudi and Qatari riyals, the UAE dirham, the Hong Kong dollar, the Chinese yuan and the Malaysian ringgit.

In kerb trading, increased tension over borders had pushed the rupee down to new lows this month against the dollar, which crossed Rs61 barrier in the earlier weeks. But efforts to defuse tension helped released the pressure on the rupee somewhat. It staged a significant recovery towards the close of the previous week, trading at Rs60.40 and Rs60.50 on May 24.

As uncertainty still prevails over borders, the parity continued to be under pressure. Leading investors have kept themselves in sidelines, in the absence of any major development. The rupee on May 27, shed another 10 paisa to trade at Rs60.50 and RS 60.60 against the previous weekend’s level of Rs60.40 and Rs60.50 versus the dollar. The parity stayed unchanged at overnight level amid lack of buying interest on May 28. Falling demand for dollar and its improved supply in the kerb on May 29 enabled the rupee to recover 20 paisa and trade at Rs60.30 and Rs60.40. On May 30, rise in corporate demand pushed the rupee down 10 paisa, reverting to previous weekend’s level of Rs60.40 and Rs60.50.

On May 31, continued fear of war between India and Pakistan forced the rupee to shed 10 paisa towards the close of the week. Some investors preferred to indulge themselves in dollar buying on limited scale. The dollar was quoted at Rs60.50 and Rs60.60 during the day, a level earlier attained on May 27. Over the previous weekend close, the rupee was down 10 paisa this week. Most experts are of the view that the rupee will regain its upward rising trend once the dust of war settles.

In the international financial market, the dollar was little changed on May 27, as holiday thinned trading afforded the US currency some relief from last week’s selling which drove it to multi-month lows against key currencies. Many traders have been unrelenting in their desire to sell the US currency, amid persistent questions about the US economic recovery. Speculative positions in the latest week showed market players aggressively shorting the dollar versus major currencies.

Though many see further losses in store, analysts say the market’s lack of dollar leaves the greenback in a position to put further distance in last week’s 8-month low against the euro and 16-month tough versus the Swiss franc. The influx of capital from abroad has overwhelmingly supported the US currency in recent years, but the desultory performance of the American financial markets — particularly the Wall Street — has led many global fund managers to curb their enthusiasm for the US assets.

The euro hovered around 92 cents versus the dollar modestly higher than previous weekend’s US closing level. It drifted to session lows against the yen, trading near 124.75 yen, unchanged from its prior US close. Dealers remained acutely aware of Japan’s aggressive campaign to weaken its currency, as a revival takes shape in the world’s second-largest economy.

Sterling ended little changed against the euro and the dollar after a public holiday in the United Stated depressed trading activity. There had been little news to give the pound much independent direction and the currency was taking its cues from the euro/dollar exchange rate. Sterling was trading at 63.10 pence per euro, barely changed from last week’s closing New York levels but around half a penny higher than last week’s nine-month lows. The pound was also steady at $1.4568.

On May 28, the dollar moved little in Asia trapped between caution over possible yen-selling intervention by the Bank of Japan (BoJ) and yen bids from the Japanese exporters. The BoJ stepped in twice last week to sell yen as the dollar fell below 124 yen. The dollar hovered around 124.70 yen throughout Asian trade, compared with 124.69 late in holiday-thinned US trade.

The euro was also subdued, at $0.9213 against $0.9206 in late New York, after having failed to capitalize on a positive surprise in German Ifo survey of business sentiment for May a day earlier. Against the yen, the euro was little changed at 114.81 yen. Sterling fell to a nine-month low against a resurgent euro but leapt to a two-week high versus the dollar after the US consumer confidence data knocked down the greenback across the board. Starling was trading at 63.50 per euro, half a per cent down from late New York and not far off levels untested since March last year. Against the dollar, sterling rose to $1.4636 after the US data, having spent the entire day at around $1.4580-$1,4591 in quiet trading.

On May 29, the dollar failed to fight off lingering doubts over an economic recovery in the United States, staying under pressure in Asia although propped up by the possibility to Japan’s yen-selling intervention. The dollar held near its late New York level of 124.41/49 yen throughout the day. It was quoted at 124.54/56. The euro also held firm around 92.85 cents little changed from its late New York level and off an eight-month peak of 93.07 hit the previous day. Against the yen, it was flat at 115.68/74 yen.

The pound fell to a new 14-month low against the euro with analysts attributing the move to a continued firming of the euro against major currencies, particularly the dollar. It hit its lowest levels since the second week of March, 2001 at 63.85 pence per euro. Against the dollar, the pound was quoted at $1.4605 little changed on the day. The pound has been falling steadily against the euro since early April.

On May 30, the euro climbed to a 14-month high against the dollar on continued worries that the US economic recovery may be losing pace, while the yen edged back up towards levels that prompted Japan to intervene last week. The single currency, carrying over the bullish sentiment from offshore trade, rose to 93.70 cents around midday.

The euro was also supported against the yen on commercial demand and gains made against the dollar, inching up to 116.26 yen against 116.18 in late New York and 115.52 in Tokyo. The dollar also slipped against the yen, hovering around 124.21 yen against 124.38 in late US trade. Traders remained cautious about selling the greenback further as the Bank of Japan may intervene by offloading yen.

The British pound sank to its lowest level against the euro in over a year caught in the downdraft of the single currency’s surge against the dollar. The euro had risen as high as 64.08 pence by late afternoon trading here, its strongest showing since March 1, 2001. But the pound fared better against the dollar, hitting three-week peaks as $1.4680 as renewed concerns over the strength of the US recovery sent the greenback reeling across the board.