Higher demand for dollars from different quarters forced the rupee to surrender its gains in terms of US currency this week. Besides, continued political instability in the country is building up pressure on the rupee.

Earlier, after the announcement of resignation by President Musharraf, the market saw the rupee rebounding versus the American currency. The rupee reached as high as Rs73 against the dollar after recovering from the historic lows of Rs77.

But this proved short lived as the rupee came under downward pressure later in the week. In the past 12 months to August 22, the rupee has so far depreciated by nearly 21 per cent against the dollar and by 27 per cent against euro.

In the inter-bank market, the rupee commenced the week on a happy note as it managed to recover against dollar, gaining 130 paisa on the buying counter and another 125 paisa on the selling counter over its previous week close level of Rs 76.60 and Rs76.65.

The dollar traded at Rs75.30 and Rs75.40 on August 18. The rupee extended its overnight firmness on the second day in a row further recovering 120 paisa on the buying counter and 80 paisa on the selling counter with the dollar changing hands at Rs74.50 and Rs74.60 on August 19. At one stage in the early trading session, the rupee went as high as Rs73.45 and Rs73.50 before it fell slightly on increase in dollar demand by importers towards the close of the day.

However, after rising against the dollar for two days, the rupee assumed downward trend on the third day, when it lost 30 paisa for buying and 25 paisa for selling to trade at Rs74.80 and Rs74.85 on August 20, amid uncertainty over the judges issue.

The rupee continued its decline on the fourth day as uncertain feature of two leading coalition government prevails. The rupee sharply shed 130 paisa and traded at Rs76.10 and Rs76.20 against the dollar on August 21, due to heavy

forward buying of dollars

by the importers.

On August 22, the rupee/dollar parity remained under heavy buying pressure. At one point during the day, the rupee breached Rs77 mark against the dollar.

However, it recovered some losses before closing the day and the dollar was seen changing hands at Rs76.45 and Rs76.55, down 35 paisa over the previous day’s close on strong demand for dollar by the importers prevailed in the market. However at the end of the week in review, the rupee in the inter-bank market managed to recover 15 paisa against the dollar over the previous week close of Rs76.60 and Rs76.65, while it has lost Rs 5.55 since July 22, when the dollar was at Rs70.90 and Rs70.93.

In the open market, the rupee continued to remain under pressure against the dollar, though it managed to rebound on the opening day of the week in review, recovering 45 paisa against the dollar for buying and another 75 paisa for selling at 76.05 and Rs76.25.

It had closed last week at 76.50 and 77.00. rupee continued its ride versus the dollar on the second trading day, gaining 165 paisa to change hands against the dollar at Rs73.40 and Rs73.80 on August 19. On August 20, however, the rupee suffered losses against the dollar, shedding 20 paisa on buying and 70 paisa on selling to trade at Rs73.60 and Rs74.50 during the day.

On August 21, the rupee failed to maintain its firmness, shedding 145 paisa on buying and 90 paisa on selling to trade at Rs75.05 and at Rs75.40 against the dollar.

On August 22, the rupee suffered fresh losses versus dollar, shedding 155 paisa on buying and 175 paisa on selling to trade at Rs76.60 and Rs77.15 at the close of the week. On cumulative basis, the rupee during the week was slightly lower by 15 paisa against the dollar in the open market. However, the rupee has lost Rs 4.60 on buying and Rs4.85 on selling over the past one month. The dollar was changing hand at Rs72.00 and Rs72.30 in the open market on July 22 this year.

Versus the European single common currency, the rupee showed mixed sentiments though its weakness prevailed throughout the week. On the first trading day, the rupee held its weekend level for buying, while it gained 60 paisa on selling and traded at Rs111.30 and Rs111.40 on August 18.

The euro had closed the previous week at Rs 111.80 and 112.00. It further gained 500 paisa on August 19, changing hands at Rs106.05 and Rs106.20. However, on August 20 it suffered losses up to 240 paisa to trade at Rs108.40 and Rs108.60.

The rupee lost another 90 paisa on August 21, when the euro was seen trading at Rs110.30 and Rs110.50. On August 22, the rupee suffered sharp decline against euro, losing Rs2.30 for buying and Rs2.20 for selling to trade at Rs112.50 and Rs112.70, bringing cumulative loss this week to 70 paisa. The rupee was down by 75 paisa over July 22, when the euro was at Rs113.25 and Rs113.45.

In the international financial markets, the US dollar eased off a seven-month peak against the yen on the week’s opening day, halting an 11-day advance against a basket of currencies, as falling stocks and rebounding gold saw investors skim profits off a recent rally. The euro rose to session highs around $1.4767, but retreated to about $1.4693, flat on the day. It has dropped about 8 percent against the dollar from its record peak hit last month.

US stocks declined on prospects of more losses from the mortgage crisis, contributing to pulling the dollar from seven-month highs around 110.70 yen touched last week close. The dollar was last down 0.3 per cent at 110.11 yen.

Sterling has lost roughly six per cent against the dollar this month. Sterling was flat against the dollar at $1.8660, hovering near a low of $1.8510 hit on Friday for the first time since mid-2006.

On August 19, the euro climbed to a session high of $1.4791, recovering from a six-month low of $1.4631 earlier, according to Reuters data. It was last at $1.4768, up 0.5 per cent. The dollar dropped to a session low of 109.56 yen. It was last down 0.3 percent to 109.78 yen. The euro rose 0.2 per cent to 162.09 yen, after earlier hitting a three-month low at 160.87 yen. The pound trimmed some losses as the dollar was unable to hold onto initial gains made after higher-than-expected US producer prices. It was down 0.1 per cent at $1.8620, not far from a two-year low of $1.8510 set last weekend.

On August 20, the euro dropped to an intraday low of $1.4673, within spitting distance of its six-month low around $1.4631 hit on August 19, according to Reuters data.

It was last down 0.3 per cent at $1.4737. The dollar firmed 0.1 percent to 109.81 yen, after earlier rising to 110.27 yen. Those gains were eroded as US crude futures reversed early losses in choppy trade and worries over the health of the country’s financial sector lingered. The pound was at $1.8624, down 0.2 per cent on the day, and not far off last week’s 2-year lows at $1.8510.

On August 21, the dollar fell as low as 108.14 yen at one point, though it rebounded and was down 1.2 per cent at 108.52 yen in late New York trade. Against the Swiss franc, the dollar fell 1.2 per cent to 1.0870 Swiss francs. The euro raced to a session high of $1.4896 and was last up 1.0 per cent at $1.4888. Against the yen, the euro was last down 0.2 per cent at 161.55 yen.

Sterling rose nearly half a per cent higher against a broadly weaker dollar to $1.8700, near a session high $1.8711 after investors took steep rally in oil prices, coupled with ongoing worries about the health of the US financial sector, as a cue to dump the US currency.

At the close of the week on August 22, the dollar climbed 0.5 per cent from late US trade to 108.95 yen, pulling up from a low of 108.13 yen hit the previous day but off the seven-month peak of 110.67 yen hit this month.

The euro dipped 0.2 per cent to $1.4880, recovering from a six-month low of $1.4630 struck this week.

Against the yen, the single currency rose 0.3 per cent to 162.08 yen after hitting a three-month low of 160.19 yen a day earlier. The pound was down 1.1 per cent on the day at $1.8586, having earlier plumbed a low of $1.8550.