The rupee commenced the week on a negative note. When trading resumed on May 4, after observing long weekend on account of May Day and Eid-e-Milad-un-Nabi from May1 to 3, the local currency market witnessed improved demand for dollars.
In the inter-bank market, the rupee shed three paisas in the first trading session with the American currency changing hands at Rs57.46 and Rs57.47. On May 5, the rupee continued its downtrend and shed two paisas more trading at Rs57.48 and Rs57.50 against the dollar, amid rising dollar demand.
The trend persisted on May 6, when continuous dollar demand forced the rupee to breach Rs57.50 barrier in the interbank market. Banks' short-covering position did not allow the rupee to maintain its firmness.
The rupee lost five paisas and traded at Rs57.53 and Rs57.55 on May 6. Both foreign and local banks bought around 30-35 million dollars to meet the payment requirements. On May 7, the rupee did not show major change versus the dollar, which traded at Rs57.54 and Rs57.56, down one paisas over the overnight levels. At this level, however, the rupee suffered a loss of ten paisa against the dollar this week in the inter bank market.
In kerb trading, the rupee shed 10 paisas versus the dollar for buying at Rs58.05 and selling at Rs58.10 on May 4, as greenback took strength on increased banks' demand for meeting immediate requirements.
It remained unchanged on May 5. Profit-taking was seen in the open market on May 6, as the US currency lost its firmness following the selling pressure. The rupee recovered seven paisas in relation to the dollar changing hands at Rs57.95 and Rs58.05.
On May 7, the rupee in the open market shed five paisas versus the dollar changing hands at Rs58.00 and Rs58.10. Over the previous week close, the rupee in the week under review showed a decline of only five paisa in the open market.
The rupee extended its fall versus the euro, when trading resumed after a long week end. It lost 25 paisas against the euro, which changed hands at Rs69.70 and Rs70.00. Slight appreciation in euro in the international markets helped it to extend its rise versus the local currency on May 4.
The rupee on May 5, failed to come out of its persistent weakness versus the euro and lost 65 paisa to trade at Rs70.32 and Rs70.62. The rupee went down as the single European currency started showing its strength versus the dollar.
The dollar lost its ground in the world markets versus most currencies as the Federal Reserve Bank froze short-term interest rates at 1958 level. The euro was gaining on the back of dollar's slide and expectations that the BoE may raise interest rates.
On May 6, the rupee, however, managed to stay firm versus the single European currency and was quoted at Rs70.30 and Rs70.60, after staging a slight recovery of two paisas over the euro.
The rupee however managed to recover on May 7. It gained 20 paisas versus the euro and traded at Rs69.80 and Rs70.10. Over the week, the rupee posted a decline of 35 paisas against the euro.
In the international financial markets, trading was subdued with Japanese markets closed until May 6, for the Golden Week holiday period and Britain closed on May 3, for the May Day bank holiday.
The dollar gained on May 3, after a weaker-than-expected US manufacturing report also showed inflation pressures a day before the Federal Reserve meets to discuss monetary policy. After oscillating in thin trade following the report, the dollar moved higher within ranges.
In the US session, the euro slipped against the dollar as traders briefly tested the $1.1920 support area. It then bounced back above $1.1970 following the release of the Institute for Supply Management report's manufacturing index, which showed the US factories slowed the pace of their output slightly in April.
In New York, the euro was down 0.4 per cent against the dollar, trading at $1.1932. The dollar was little changed against the yen at 110.26 yen, while the euro was down 0.6 per cent against the yen to 131.60 yen. Sterling was down 0.4 per cent at $1.7707.
On May 4, the dollar extended losses against major currencies after the Federal Reserve left official US interest rates unchanged, as expected and said price risks were balanced.
Following the central bank's announcement, the euro rose to session highs of $1.2116, up from $1.2080 shortly before the Fed's announcement. It subsequently traded at $1.2094 late in New York up about 1.3 per cent. Against the yen, the dollar fell to around 109.33 yen, from 109.92 yen prior to the Fed's announcement, down about 0.8 per cent.
Sterling skipped two cents higher against the dollar after strong data on British mortgage lending, retail sales and the manufacturing sector left little room to doubt a Bank of England rate hike.
It traded at $1.7913, only a fraction below the day's peak of $1.7936 and two cents above the previous session's close at $1.17713. It was also steady on the day versus the euro at 67.34 pence.
On May 5, the dollar fell against the euro as investors took profits ahead of April US employment report. The dollar recouped some of its losses in midmorning New York trade after a US service sector activity index showed a stronger-than-expected reading.
But the currency softened as the market turned its focus to jobs report. The euro was up about 0.6 per cent against the dollar at $1.2168, just below a four-week high of $1.2179 reached earlier in the global day.
One reason for the dollar's lacklustre reaction to the report was that the greenback has already priced in so much robust US economic data. Hopes for higher rates had acted as a key support for the dollar during its rally of nearly 12 cents against the euro from February to April, until that rally began to fall in the past few sessions.
The dollar traded down about 0.7 per cent against the Japanese currency to 108.62 yen. Japan was closed on the final day of its Golden Week holidays, which kept Asian trading light.
The greenback also traded down 0.5 per cent against the Swiss franc at 1.2742 francs after falling as low as 1.2694 francs, its lowest since early April.
Sterling lost ground as the market squared positions and took profits ahead of an expected interest rate rise from the bank of England in the next session. It slid up to 0.9 per cent on the day to 67.89 pence per euro, its weakest level since March 16.
It lost half a per cent to $1.7876 before struggling back to $1.7924 having earlier climbed through $1.80 for the first time in two weeks. On May 6, The dollar rose broadly after a better than expected weekly US jobless claims report offered more positive news on employment, one day before the important April non-farm payrolls report.
Another strong jobs growth number would reinforce the case for the Federal Reserve to tighten interest rates sooner than expected from a 46-year low of one per cent. Higher rates would make holding US assets more attractive and lift the dollar.
In New York, the euro traded down 0.6 per cent against the dollar to session lows of $1.2066. The dollar extended gains against the yen, trading up 0.86 per cent at 109.60 yen, but off the highs of 109.79 yen. It was up 0.8 per cent against the Swiss franc at 1.2846 francs.
In London, sterling rose against the euro after the Bank of England raised interest rates a quarter point and reaffirmed expectations of gradual increases in British borrowing costs for the rest of the year. The BoE's third hike since November took the benchmark interest rate to 4.25 per cent.
At the close of the week on May 7, the dollar rose in anticipation that weekend US employment data would strengthen the case for a near-term rise in the US interest rates.
The yen, for its part, was bruised by a fall in the Japanese stock prices as well as concerns about political confusion after Japan's top government spokesman said he was resigning over payments to the state pension plan that he should have made.
