Mixed sentiments were witnessed in the local currency market this week with the rupee/dollar parity moving both ways. The week commenced on a positive note as continued dollars inflow strengthened the rupee's value in the inter-bank market on January 26, gaining five paisas at Rs57.29 and Rs57.32.

The rupee has managed to gain modestly due to improved supply of dollars in the market, despite the fact that banks are covering their position. On January 27, the rupee inched up with a modest gain of two paisas changing hands at Rs57.27 and Rs57.30. The comfortable supply of the dollars and lack of interest in dollars trading helped the rupee gain further ground.

On January 28, the rupee failed to maintain its overnight firmness versus the dollar, losing two paisas to trade at Rs57.30 and Rs57.32. The dollars' persistent demand pushed the rupee's value down. However the corporate demand pushed the dollar's value up on January 29, as the rupee lost eight paisas versus the greenback, which traded at Rs57.38 and Rs57.40. Mostly banks were in the market to buy dollars for heavy payment requirements.

On January 30, the rupee/dollar parity remained under pressure at Rs57.41 and Rs57.43, amid persistent demand for the greenback. The rupee lost modestly versus the dollar as the leading banks were still engaged in buying greenback to cover their short-term position ahead of Eid-ul-Azha holidays. Over the previous week close, the rupee in the week under review lost 7 paisas against the dollar.

In the kerb the rupee picked up eight paisas against the dollar on January 26 to trade at Rs57.20 and Rs57.25. But then it shed five paisas against the dollar changing hands at Rs57.25 and Rs57.35 on January 27. Heavy payments in the interbank market forced the rupee to extend its weakness in the kerb market, shedding five paisas more to trade at Rs57.30 and Rs57.35 on January 28.

On January 29, the rupee, despite higher demand for dollars, did not show any change versus the greenback which traded at Rs57.30 and Rs57.35 amid modest activity, but then it shed two paisas against the dollar on January 30 and traded at Rs57.32 and Rs57.37. As compared to previous week close, the rupee in the kerb shed 5 paisas during the week.

Against the euro, the rupee followed suit and gained 11 paisas changing hands at Rs71.30 and Rs72.10 on January 26. The rupee, however, gained seven paisas for buying at Rs71.23 and 47 paisas for selling at Rs71.53 due to euros falling value in the world markets on January 27.

The rupee also came under pressure on January 28, losing 72 paisas to trade at Rs71.95 and Rs72.25. It, however, managed to gain 55 paisas and traded at Rs71.38 and Rs71.68 on January 29. It further gained 65 paisas more versus the euro to change hands at Rs70.73 and Rs71.05. During the week rupee managed to gain Rs1.18 versus the euro, despite rising demand for the single European currency in the local market.

In the international financial market, the dollar rallied against several major currencies on January 26, on talk by European officials about curbing euro strength ahead of next week's meeting of finance ministers from the Group of Seven industrial nations.

Traders' expectations that the G7 may nudge Japan and China to allow their currencies more room to appreciate against the dollar lifted the yen, especially against the euro.

The euro's drop of more than 1 percent against the yen contributed to the European currency's fall versus the dollar.

The euro slid 1.2 per cent against the yen to 132.52 yen and 0.91 per cent against the dollar to $1.2471 in late New York trading. The dollar climbed 1.2 per cent against the Swiss franc to 1.2570 francs. It fell 0.3 per cent to 106.29 yen, sagging to three-year lows against the yen not far below the 106.0 yen level hit earlier this month. Sterling slipped 0.8 per cent to $1.8114.

The dollar dropped more than one per cent against the euro and Swiss franc and hit a three-year low against the yen on January 27, as signs of labour market softness in a US consumer confidence report surprised traders. The greenback was also pressured by comments from one Japanese policy-maker who said intervention was aimed at smoothing volatility, not at keeping the yen at a specific level. The dollar fell below a three-year low of 105.70 yen set earlier in January, hitting fresh three-year lows at around 105.47 yen.

In New York, the dollar traded at 105.62 yen, down 0.6 per cent on the day. The yen firmed against the dollar after Finance Minister said Japan's policy of intervening in the foreign exchange market was aimed at smoothing volatility and not at keeping the yen at a certain level.

The euro traded up 1.4 per cent on the day to $1.2639, while the Australian dollar was up 1.2 per cent versus the greenback to US $0.7787. The dollar fell about 1.3 per cent against the Swiss franc to trade around 1.2400 francs.

Sterling came under broad-based pressure on January 27, losing half a per cent against the euro and hitting a one-week low on the dollar as British Prime Minister Tony Blair rode into the worst storm of his premier-ship. But while sterling had erased early losses versus the dollar by late London, investors were not in a hurry to buy back the currency.

The sterling was nursing losses of 0.70 per cent against the euro, at 69.21 pence. The pound, which hit a one-week low of $1.8020 in early trade, had recovered to $1.8190.

On January 28, the dollar shot higher, gaining one per cent against the euro and the Swiss franc after the Federal Reserve shocked traders by dropping the phrase referring to a "considerable period" of loose monetary policy from its statement.

In late New York trading, the euro was at $1.2482, down about 1.2 per cent. Against the yen, the dollar was at 106.08 yen, up 0.4 per cent on the day, above previous day's three-year low around 105.42 yen. Against the Swiss franc, the dollar was up 1.2 per cent to 1.2552 francs.

Sterling climbed to a two-month high against the. The pound rose steadily against a falling euro. It stood just below session peaks at 68.65 pence, up around three-quarters of a per cent on the day. The pound kept pace with a broadly firmer dollar at $1.8290, down almost a cent from session peaks but up more than 2-1/2 cents from one-week lows set on January 27, ahead of the knife-edge parliamentary vote.

On January 29, the dollar surged against the euro again in the second leg of a rally that erupted the previous day when the US Federal Reserve unexpectedly shifted its tone on monetary policy. The dollar's rebound over the past two days of trading has pushed the euro down into new ranges and may alter traders' perceptions about what to expect from next week's Group of Seven finance ministers' meeting in Florida. In New York, the euro was down 0.6 per cent at $1.2400, after falling to a one-week low of $1.2364.

Against the Japanese currency, the dollar declined to 105.92 yen, but above this week's three-year low around 105.42 yen. Versus the Swiss franc, the dollar gained 0.4 per cent to 1.2601 francs.

The Australian dollar, a high-yielding currency, dropped 1.5 per cent against the US dollar to US$0.7616. The euro fell 0.8 per cent against the yen to 131.41 yen. The euro's short-term trading range has fallen to between $1.2300 and $1.2600, where it will likely trade until the G7 meeting kicks off next week.

The pound gained to its strongest level in more than two months against the euro on Thursday as the single currency retreated on the dollar and expectations remained high that the UK interest rates would head up next week.

Sterling failed to make headway against the US currency, however, which was enjoying a revival after the US Federal Reserve hinted that interest rate rises from 45-year lows were now on its radar screen.

On a trade weighted basis, the pound stood at its highest since February last year, with the index at 103.3. Against the dollar, though, it was slightly lower on the day at $1.8175, around four cents down from this month's 11-year high.