Corporate demand and short-supply position of the US currency kept the rupee-dollar parity rates under pressure both in the open and interbank markets.

At the same time, dearth of dollars is widening the gap between its official and open market rates.

The week opened on a positive note with the rupee moving up versus the dollar and gaining two paisas changing hands at Rs57.70 and Rs57.72 on May 17, in the inter-bank market over its previous week end level. However, failing to maintain its overnight level on May18, the rupee showed weakness versus the dollar due to heavy payments and lost two paisas to trade at Rs.57.72 and Rs.57.74.

On May 19, the rupee continued its fall and lost three paisas in relation to dollar trading for Rs57.75 and Rs57.77 a dollar. The rupee-dollar parity did not show any change in the inter bank market on the May 20, as the rupee stayed at its overnight levels of Rs57.75 and Rs57.77 against the dollar.

On May 21, the rupee gained one paisa against the dollar in interbank market, which traded at Rs57.74 and Rs57.76. Over the week, the rupee in the inter bank market lost only two paisas against the dollar, amid fluctuations.

Tight supply of dollars in the open market forced the rupee to extend its fall, losing more five paisas for buying at Rs58.45 and 10 paisas for selling at Rs58.55 on May 17. Money experts said that the rupee was likely to touch the new low after breaching Rs59 level if the demand for dollars continued in the interbank market,

On May 18, the rupee continued its fall versus dollar in the open market after losing five paisas and traded at Rs58.50 and Rs58.60. Some moneychangers were of the view that the rupee value was going down owing to tight supply of dollars whereas their demand is normal in the market. Under the circumstances, importers were on the sidelines, expecting further increase in the dollar's rates.

On May 19, the rupee further shed five paisas versus dollar in the open market for buying at Rs58.55 while it did not show any change on the selling counter at Rs58.60. Market players were expecting that the rupee was likely to touch the new low versus dollar on persistent demand for dollars ahead of federal budget. They were anticipating that the greenback's gain may force the dollar holders to choose the unofficial channels for better profit

In the opening market, the rupee lost its firmness due to excessive buying by the inter-bank market. The corporate demand for dollars pushed it down. On May 20, sharp decline was seen in the rupee's value versus the dollar as it lost 10 paisas and traded at Rs58.65 and Rs58.75 on rising demand of the greenback Falling trend continued in the open market on May 21, as the rupee lost five paisas versus the dollar for buying and selling at Rs58.70 and Rs58.80.The dollar is still in demand mainly because of huge payments till the end of current fiscal year. This week the rupee shed 30 paisas over the dollar

As a result of euro's surge in the world markets, the rupee lost 88 paisas versus the single European currency and traded at Rs70.50 and Rs70.80 on the opening day. On May 18, the rupee, however, gained 20 paisas in relation to euro to change hands at Rs70.30 and Rs70.60.

On May 19, the rupee again gained 10 paisas and traded against the euro at Rs70.20 and Rs70.50 on profit-taking. The rupee further recovered 25 paisas versus the euro for buying and selling at Rs69.95 and Rs70.25 on May 20.

On May 21, the rupee lost 60 paisas versus euro in the open market and traded at Rs70.55 and Rs70.85, as the single European currency started showing its muscles on dollar's vulnerability.

Locally, people were taking interest in euro buying in anticipation of its further possible rise. Now it seems that the euro may cross Rs71 mark in the coming days. During the current week, the rupee has lost 93 paisas versus the euro.

Meanwhile, widening gap between the official and open market rates may force the rupee to yield more against in the near future. At the beginning of the month of May, the spread between the two market rates was 70 paisas, but now it expanded to nearly 80 paisas. The rupee is likely to keep its present trend ahead of budget for 2004-05, which is expected to be announced on June 5.

In the international financial markets, the dollar wiped out some of last week's gains on May 17, as geopolitical tensions resurfaced following bombing in Turkey and Iraq, sparking a sell-off in the US currency on heightened security fears.

Analysts said the dollar was also hurting from fairly weak US economic data released on last week tempering some expectations the Federal Reserve as ready to raise interest rates. Such an increase would boost the dollar by making yields on the US assets more attractive to foreign investors.

In New York, the euro was up 1.25 per cent at $1.2026. Against the yen, the dollar was trading slightly higher at 114.28 yen. The dollar fell 1.5 per cent to 1.2750 Swiss francs.

Sterling gained 0.6 per cent to $1.7692. The pound fell to a two-month low against a broadly firmer euro but rose nearly one per cent versus the dollar as investors withdrew funds from the greenback into the euro after bomb blasts in Turkey and Iraq.

The euro rose two thirds of a per cent against the pound to 68.16 pence in London. Against the dollar, the pound was up almost one per cent on the day at $1.7745. The pound's trade-weighted index, which has a euro weighting of 64.82 per cent, a dollar weighting of 16.49 per cent and a yen one of 7.0 per cent, fell to a two-month low.

On May 18, the dollar slipped against the yen after a report showed robust Japanese economic growth, but it climbed against the euro in a technical recovery after losses in the previous session.

The yen recovered from multi-month lows on news Japan's economy grew a real 1.4 per cent from January to March versus the previous quarter, above the 0.9 per cent market forecast. But in the absence of market-moving news, currencies traded within ranges as investors sought a definitive market direction.

Comments from Federal Reserve officials bolstered expectations of a dollar-boosting interest rate hike, helping the dollar to reclaim some of its early losses. The US currency also scored some gains against the euro on a technical rebound after posting losses the previous day amid renewed geopolitical tensions bombings in Turkey and Iraq had fuelled a sell-off in the dollar.

In New York, the dollar was down 0.2 per cent at 114.16 yen. The euro was down 0.57 per cent against the dollar at $1.1948. The euro also fell 0.8 per cent to 136.36 yen.

The euro came under pressure in European trade after the German ZEW gauge of economic optimism fell to 46.4 in May, the lowest since last July, from 49.7 in April. The dollar, which suffered its biggest one-day fall against the safe-haven Swiss franc since January, traded firmer at 1.2834 francs.

Sterling meanwhile, was slightly lower at $1.7667. The dollar further added to its gains against the euro and trimmed losses against the yen after Federal Reserve bank of Richmond President said an upswing in core inflation had grabbed the Fed's attention.

In London, the pound was briefly hurt early in the day by British inflation data, which disappointed some traders even though it came out in line with consensus, showing a small up tick in the annual headline figure.

Sterling traded 0.1 per cent stronger from the previous day's close at $1.7703. Earlier in the day, it was trading as low as $1.7614. The pound also gained 0.4 per cent versus the euro at 67.60 pence, after coming very close to previous day's two-month low of 68.16 pence.

The dollar weakened broadly on May 19 as a global equity recovery made investors more risk-friendly, boosting currencies that offer high interest rates such as the Australian dollar and sterling. The yen extended gains across the board on the strength of a rally in Tokyo stocks and growing optimism about the Japanese economy.