The local currency remained under pressure throughout May. The open market, in particular, witnessed sharp downtrend. Range-bound trading was seen in the interbank market on the opening day of the week, as the rupee did not show big variations versus the greenback.
The dollar changed hands at Rs 57.68 and Rs 57.70 on May 31. On June 1, the rupee lost five paisa against the dollar in the interbank market changing hands for Rs 57.73 and Rs 57.75, on increased demand for the greenback.
Year-end payments did not allow the rupee to sustain its steadier trend versus the dollar. On June 2, payment requirements pushed the rates down further with the rupee shedding more then two paisa in relation to dollar, which traded at Rs 57.74 and Rs 57.77. On June 3, the rupee lost five paisa in terms of the dollar and traded at Rs 57.78 and Rs 57.80.
No major change was seen in the open and interbank markets on June 4, as most market players remained on the sidelines due to MMA strike call. Trading remained suspended in the local currency markets. The rupee this week lost nine paisa versus the dollar in the interbank market.
In Kerb dealings, the rupee reversed its last week's firmness on the week's opening day, shedding 13 paisa over the previous week close with the dollar trading at Rs 58.18 and Rs 58.23 on May 31.
Banks were covering almost all their short-term needs from the open market, which forced the local currency to lose its value. On June 1, the rupee extended its overnight weakness, falling seven paisa to trade at Rs 58.30 and Rs 58.40 on excessive buying of dollars by interbank market.
On June 2, the rupee, however, gained two paisa for buying and five paisa for selling to trade at Rs 58.28 and Rs 58.35 versus the dollar. The dollars' smooth supply eased the pressure on the rupee in the open market.
The increased demand for dollars pushed the rupee value down in the open market on June 3, shedding 10 paisa, changing hands for Rs 58.35 and Rs 58.45. Corporate buying, dragged down the rupee's value bringing it under pressure due to heavy payments ahead of the federal budget.
There was no trading in currencies in the open market on account of strike to protest killings in Karachi. The rupee in the open market lost 30 paisa against the dollar this week. The single European currency lifted from the drifting position in the world markets and this factor pushed it up in the local market on May 31.
The rupee lost 20 paisa against the euro changing hands at Rs 70.70 and Rs 71.00. On June 1, the rupee shed five paisa more and traded at Rs 70.75 and Rs 71.05 against the euro.
On June 2, the euro shrugged off its overnight vulnerability, gaining 55 paisa to trade at Rs 71.30 and Rs 71.60 on improved demand. The rupee, however, gained 35 paisa versus the euro to trade at Rs 71.05 and Rs 71.35 on June 3. In the week, the rupee lost 55 paisa versus the euro.
On the international front, many financial centres in US and the London were shut for one day holiday. In Tokyo, the dollar fell to a three-week low against the yen in holiday-thinned trade on May 31, after a lethal attack in Saudi Arabia caused some investors to worry about higher oil prices and increased violence in the Middle East.
Dollar-buying sentiment has soured in the past two weeks as high oil prices and dovish comments from the US Federal Reserve have dampened hopes of a significant raise in US interest rates in June.
The US currency was trading at 109.80/83 yen after dipping as low as 109.72, the lowest mark since May 7 and compared with 110.22 yen in late New York trade last week. It was nestled around $1.2205 per euro compared with around 1.2225 in late US trade on Friday.
The single currency dropped nearly 1-1/2 yen from its day high to 133.85 yen. The dollar had been receiving a boost in recent months from growing speculation that the US Federal Reserve would lift interest rates in June.
On June 1, the dollar fell against European currencies, as surging oil prices put a question mark over the US economic recovery and overshadowed upbeat US manufacturing and construction data.
Manufacturing activity expanded more than expected in May, marking the twelfth straight month of increases, with factory hiring at its highest level in 31 years, according to the Institute for Supply Management. Construction spending rose more than expected to a third consecutive record high as higher mortgage interest rates spurred a rush to build.
However, the surge in oil prices over the last month attacks on foreign workers in Saudi Arabia's oil production region and mixed US economic data have turned a bright green light for dollar gains into a cautious flashing yellow.
The euro regained ground it lost following the economic data and moved to a session high $1.2265 before easing back to trade at $1.2243, up 0.49 percent. The euro is less than a cent below previous week close seven-week high of $1.2296.
The dollar extended its gains against the yen, trading to a session high 110.71 yen, before slipping to 110.36 yen, a gain of 0.79 percent. The euro surged to 135.28 yen up 1.40 percent on the day.
On June 2, the dollar recovered ground after hitting a two-month low against the euro and a three-month low against the Swiss franc on concerns surging oil prices could hurt the US economy and delay an expected rise in US interest rates.
Worries that dollar-supportive US rate hikes might not occur as fast as expected were triggered by a report that Federal Reserve Chairman Alan Greenspan was calling for a more measured move to more neutral monetary policy, traders said. But the dollar recouped most of its losses against the euro in late morning trade in New York.
The yen weakened against major rivals in Tokyo, hurt by upbeat data on US manufacturing and a view that European currencies were the most resilient to surging oil prices.
It fell as low as 110.92 per dollar before fetching 110.80 per dollar, down 0.27 percent on the day. It was at 135.90 yen per euro, down 0.23 percent. The yen fell to a nearly three-month low around 204.50 yen versus sterling before trading at 204.30 down 0.42 percent from late New York trade on June 1.
In New York, the euro had shed its gains to trade around $1.2233, nearly flat from the previous New York close. Earlier, the euro broke through some stop-losses to hit two-month highs around $1.2305.
The pound touched a two-month high on the dollar and held close to its highest in a month on the euro as expectations of higher UK interest rates kept it buoyed.
The pound was trading 0.3 percent higher on the day at $1.8450 having touched a two-month high of $1.8486 earlier in the session. It was trading steady on the day at 66.56 pence per euro. It touched its strongest in a month on May 31, at 66.37, and was hovering above euro support at 66.40.
On June 3, the dollar slipped only marginally despite disappointing US economic data as investors focused on positioning ahead of Friday's key US May jobs report. Broad yen weakness complicated the picture for investors as they struggled to make sense of the trading landscape among major currencies.
A steep decline in Tokyo stocks on the back of resurgent oil prices helped push the yen down sharply against the euro and the dollar, traders said, with the reverberations still being felt in New York trade.
The euro traded at $1.2228, a gain of 0.14 percent compared to the previous New York close, according to Reuters data. The dollar rose to 111.15 yen, up 1.13 percent while the euro gained 0.30 percent to 135.89 yen.
