In the inter bank market, the rupee regained strength over the American dollar this week though rising dollar demand, mostly by the foreign banks to meet huge payments, on the opening day of the week forced the rupee to give up its firmness and face steep erosion in its week-end levels.

The parity was quoted at Rs57.72 and Rs57.75 on June 2, with the rupee shedding 10 paisa over the previous weekend close. On June 3, dollar demand existed in the market from the corporate sector but easy flow of dollars managed to release pressure on the rupee, which did not fluctuate sharply against the dollar, maintaining its almost overnight levels at Rs57.73 and Rs57.74.

As dollar demand eased in the market, the rupee started showing its recovery. It managed to recover two paisa in relation to the dollar and traded at Rs57.71 and Rs57.72 on June 4. On June 5, the rupee gained another two paisa against the dollar trading at Rs57.69 and Rs57.71.

The rupee maintained its recovery versus the dollar in the inter-bank market on June 6 in the absence of any major demand, which helped it recover two paisa more and trade at Rs57.67 and Rs57.69, its highest level against the dollar during the week.

In the Kerb, the rupee came under pressure this week and crossed Rs58 mark on rising demand for dollar. On June 2, it remained unchanged at its previous weekend levels of Rs57.78 and Rs57.82 but gained 50 paisa versus euro and traded at Rs67.30 and Rs67.60 in the absence of any boosting factor in the world markets. On June 3, the rupee failed to maintain its firmness versus the dollar losing four paisa for buying and selling at Rs57.82 and Rs57.87. Fresh interest by leading investors in dollar buying was observed in the market as a result of recent fall in euro’s value. Euro traded at Rs67.60 and Rs67.90.

Increasing demand for dollars forced the rupee to continue its slide in the open market on June 4, shedding 13 paisa at Rs57.95 and Rs58.00. The rupee came under pressure because of speculative buying of dollars. Besides, people were buying the greenback instead of euro due to fall in its demand in the world markets. On June 5, the rupee shed three paisa and traded at Rs57.96 and Rs58.03. The chief reason behind the rupee’s slide in the open market was the exporters’ demand for dollars, which kept rupee under pressure. On June 6, the rupee edged up and gained one paisa in relation to the dollar for selling but lost one paisa for buying changing hands at Rs57.97 and Rs57.02. The local currency, however, lost 95 paisa against the euro and traded at Rs68.35 and Rs68.65. Against other major currencies at the interbank counter the rupee lost ground versus the Canadian, Australian, New Zealand, HongKong and Singapore dollars, the British pound, the Japanese yen, the Swedish krona, the Danish krone, the Chinese yuan, the Malaysian ringgit, the Kuwaiti dirham, the Saudi and Qatari riyals and the UAE dirham. It, however gained ground against the Swiss franc and the Norwegian krone.

In the international financial market, the dollar barely retained its gains against most major currencies on June 2 after retreating from session highs on disappointing data on the US manufacturing and construction. The economic figures dampened dollar-bullish sentiment stemming from comments over the weekend by the US President who said the United States still supported a strong dollar.

The dollar fell to 118.59 yen off 0.5 per cent on the day, while the euro was down 0.80 per cent to 139.39 yen. The euro traded at $1.1755, a loss of 0.14 per cent. The euro reached a record high of $1.1932 last week.

Sterling kept in step with euro/dollar rates coming off recent four month-highs against the rebounding dollar but also gaining ground versus the retreating euro. It traded at 71.70 pence per euro, up some 0.40 per cent on the day, and at $1.6333 per dollar, almost a quarter per cent down since last week close.

On June 3, the dollar clung to early gains in late New York trade boosted by expectations that the euro zone may receive an interest rate cut and by dovish comments on inflation from the European Central Bank chief. The dollar’s recent recovery from its $1.1932 record low against the euro was enhanced after French President Jacques Chirac said the Group of Eight leading industrial nations are closely monitoring moves on the foreign exchanges.

The dollar began the day’s trade near late US levels of 118.60 yen but gradually came under pressure as the US funds sold the euro against the yen acting as a drag on the greenback. The greenback has slid more than 10 per cent to all-time lows against the euro this year. Against the yen it is in line with its rate at the start of the year after falling to 115.10 yen in mid-May. The dollar was trading at 118.33/41 yen compared with 118.62/70 in late New York. The single currency was quoted at $1.1756/59, mostly unchanged from the late US trading at $1.1756.62. the euro dropped to 139.11/21 yen from late New York levels at 139.33.47 yen.

Sterling fell against the recovering dollar and stuck within tight ranges versus the euro. It was flat at 71.85 pence per euro — within a penny of the all-time low of 72.55 pence it hit last week versus the single currency — and down nearly half a per cent on at $1.6293. Sterling’s losses versus the dollar were roughly in line with those of the euro against the greenback, which was pressing on with a rally largely driven by technical factors as the market saw the US currency oversold on the short run.

On June 4, dollar bulls savoured the greenback’s gains against the euro after US service sector data beat expectations, but traders kept their attention squarely on euro zone interest rates, which many expect will fall. The dollar crept higher against European currencies after the Institute for Supply Management said its index on the May services sector rose to 54.5 from 50.7 in April. But the dollar’s main advance preceded the data as investors weighed their positions against an expectation that the European Central bank will cut its benchmark interest rate of 2.50 per cent.

In late New York trade, the euro traded at $1.1679, a loss of 0.79 per cent from previous day’s New York close, after having dipped as low as $1.1664. The dollar was at 1.3136 Swiss francs, a gain of 1.27 per cent on the day. The dollar fell to 118.73 yen off 0.12 per cent on the day, while the euro dropped to 138.69 yen off 1.30 per cent.

Sterling bounced versus the euro to move away from last week’s record low, aided by expectations of a yield-damaging rate cut in the euro-zone and favourable domestic data which quashed rate cut talk in Britain. It stood at 71.68 pence compared with 71.97 in late New York on June 3, off its record low of 72.55 set on May 26. Against the dollar it rose to $1.6325 from $1.6285.

On June 5, the yen rose against major currencies on demand from Japanese investors preparing to transfer assets to state pension funds.

Among yen crosses, investors dumped the once high-flying euro on expectations of a hefty rate cut by the European Central Bank (ECB), with the single currency extending losses to break the 138 yen mark and hit a two-week low of 137.72 yen.