In the inter bank market, the rupee/dollar parity moved in a narrow band during the week under review amid dull trading. The week commenced on a quiet note as the rupee managed to hold its overnight levels versus the dollar and traded unchanged at Rs57.63 and Rs57.65 on May 26.

It remained stable in a dull trade because of a holiday in the United States. On May 27, the rupee firmed versus the dollar, showing a marginal change at Rs57.61 and Rs57.63. Dollar inflows in the market were helping the rupee to appreciate slightly. Increased dollar supply boosted the rupee value further on May 28, and helped it recovered one paisa versus the dollar at Rs57.60 and Rs57.61.

On May 29, the rupee managed to command its overnight levels versus the dollar and gained further by two paisas trading at Rs57.58 and Rs57.61. On May 30, there were a few dollar payments in the market. Both the foreign and local banks bought dollars largely to meet oil imports ahead of the weekend. Hence the rupee came under pressure and failed to maintain its firmness versus the dollar shedding four paisa to close at Rs57.62 and Rs57.64. Over the weekend the rupee showed an appreciation of two paisa against the dollar touching its week lows at Rs57.63/65 on May 26 and week highs at Rs57.58/61 on May 30.

In kerb dealings, the rupee gained two paisa in relation to the dollar on May 26, and traded at Rs57.75 and Rs57.80 over the previous weekend level. The rupee did not show any change versus the dollar on May 27 but shed two paisa on May 28, to trade at Rs57.77 and Rs57.82. It maintained its almost overnight levels in the remaining week trading unchanged at Rs57.78 and Rs57.82, up one paisa over the previous weekend levels. Against the euro, the rupee gained 10 paisa on May 26, to trade at Rs68 and Rs68.30. On May 27, the rupee, however, lost 50 paisa versus the euro and traded at Rs68.50 and Rs68.80 but then it gained 65 paisa and traded at Rs67.85 and Rs68.15 on May 28.

On May 29, the rupee maintained its overnight rising trend versus the euro, gaining 35 paisa more to close at Rs67.45 and Rs67.75. On May 30, the single European currency came under pressure as speculation over a rate in the euro zone is growing and slight rise in the dollar’s value in the international markets the rupee in the local market lost 75 paisa versus the euro and traded at Rs68.20 and Rs68.50, down only 10 paisa over the previous weekend levels.

In relation to other major currencies at the inter-bank forex counter, the rupee during the week displayed strength over the Swiss franc, Australian, New Zealand and Singapore dollars, Japanese yen, Danish and Norwegian krones and Kuwaiti dinar. It remained week versus the British pound, Canadian dollar and Swedish karona and was unchanged against Hong Kong dollar, Chinese yuan, Malaysian ringgit, Saudi and Qatari riyals and UAE dirham.

On the international front, the euro hit four-year highs against the dollar and a record high against the yen on May 26 in choppy holiday-thinned trade, after a strong earthquake hit northern Japan. The single European currency was positioned to threaten its all-time high against the dollar of $1.1886 from January 1999, after hitting session peaks around $1.1876. The euro could even reach $1.20 this week, if US economic data reports indicate the world’s biggest economy is growing more slowly in the second quarter than in the first, and as worries about potential deflationary pressures in the United States persist.

The Japan’s earthquake news pushed the euro to a record high around 138.78 yen and boosted the dollar to the day’s high of 117.39 yen in an otherwise quiet session due to holidays in London and New York. Elsewhere, dealers said market focus remained on the euro’s record high of $1.1886 as a very near-term target after the single currency broke through its launch rate of $1.1747 last weekend. The dollar was at 116.80 against the yen, virtually flat on the session, and at 1.2869 against the Swiss franc down 0.1 per cent.

On May 27, the euro hit another record high against the dollar at $1.1932 as demand for higher-yielding euro-denominated assets overshadowed solid US economic data. But in a long awaited pullback, the euro’s advance was reversed as investors booked profits after a 27 per cent ascent against the greenback over the last four sessions. The single currency slipped below a support level around $1.1850. Some traders expect it to retreat to around $1.1750 before mustering a first attack on the key $1.20 mark. The British pound hit a three-month high against the weakening dollar while holding just above four-year lows on the euro as the feisty single currency extended its run on the greenback. Sterling had peaked at $1.6471 against the dollar. It hit its session low of 72.53 pence per euro, near a recent four-year low on the single currency.

On May 28, the dollar showed mettle in a broad-based rally that traders believe may have staying power, recovering form a symbolic blow when the euro hit record highs against the greenback in the prior session. In New York, the euro was at $1.1768, down 0.4 per cent and down nearly 2 cents from its highest point in the prior session. The euro hit a record of $1.1932 on May 27, the highest value since it was launched on January 1, 1999. But the euro rose briskly against the yen in turn helping propel the greenback higher against the Japanese currency. Dollar traded as high as 118.92 yen, before slipping to 118.63 yen, still up 1.2 per cent on the day.

The dollar pulled up from overnight’s 4-1/2-year low of 1.2779 Swiss francs to trade at 1.2941 francs, a gain of 0.6 per cent but down from the session high of 1.3020 franc. The pound kept better pace with the rebounding dollar than most of its peers but failed to take full advantage of the euro’s slide as uncertainty over British interest rates and the euro debate hemmed it in. Sterling was just 0.16 per cent down on the day at $1.6352 more than a cent down from this week’s three-month high against the dollar. The greenback knocked the euro back half a per cent, gained nearly one per cent on the yen, Swiss franc and Australian dollar. Against the euro, the pound was a quarter per cent firmer from a day earlier at 71.86 pence per euro, but less than a penny above opening week’s record low, and had risen to 97.6 on its trade weighted index from 97.1 on May 27.

On May 29, the dollar fell broadly surrendering some of its three-day rally, after investors brooded on indications the US job market remains weak. Greenback sagged to fresh session lows following data indicating strong Asian buying of dollar-denominated treasuries during the latest week and, separately, a Fed official’s comment noting the potential beneficial effects for exports of the dollar’s decline.

The euro jumped to session highs against the dollar at $1.1907, while also reaching new record highs against the Japanese currency at 140.63 yen. At one point in the European trading session, the dollar rose to a four-week high of 119.15 yen before falling back to 117.93 yen in late trade, down 0.5 per cent from previous day’s New York close. Sterling surged to a four-month high of $1.6545. The dollar was at 1.2835 Swiss francs, down 0.96 per cent.

At the close of the week on May 30, the euro regained its footing as dealers put the crucial upside target of $1.2 in their sights while weighing the impact of a possible rate cut by the European Central bank next week. The single currency climbed sharply in post-Asian trade as the dollar came under broad-based selling pressure following weak US weekly jobless claims data and more hints that Washington is happy with a lower dollar. The euro had fallen to a one-week low of $1.1690 on May 29, after hitting a record high of $1.1935 earlier in the week. It was quoted at $1.1879/84 compared with late US level of $1.900/04.