THE rupee commenced the week on a firm note, gaining one paisa against the dollar in the inter-bank market for buying and selling at Rs57.73 and Rs57.75 on April 28. The supply and demand was normal in the market due to which the rupee remained flat.

On April 29, the rupee lost five paisa and traded at Rs57.78 and Rs57.80. There was some demand for the dollar from the corporate side due to which the rupee came under slight pressure. On April 30, dollar buying by foreign and local banks pushed the rupee down by five paisa trading at Rs57.83 and Rs57.85.

Both foreign and local banks were in the market to cover their requirements. Trading remained suspended in the local currency market on May 1 on account of May Day holiday. The rupee did not show any major change on May 2, and continued its upward advancement, gaining another 4 paisa over its overnight level. At close it was trading at Rs57.79 and Rs57.81. Over the week as a whole the rupee recovered 5 paisa versus the dollar.

In the kerb the rupee did not budge any side versus the dollar on April 28 and traded unchanged against previous weekend close of Rs57.90 and Rs57.96. On April 29, it gained five paisa after SBP Governor’s remark that the rupee is expected to remain firm due to strong foreign exchange inflows and positive economic trend trading at Rs57.85 and Rs57.90. After the remark, kerb market received increased dollar selling. The rupee managed to maintain its surge in kerb and further recovered two paisa in relation to the dollar to trade at Rs57.83 and Rs57.88 on April 30. The upward trend reversed on May 2, as the rupee shed 2 paisa and traded at Rs57.83 and Rs57.88 amid sluggish activity. During the week the rupee had gained 7 paisa in the kerb.

Against the euro the rupee continued its weakness, shedding five paisa more for buying and selling at Rs63.65 and Rs63.95 on April 28, but later, it recovered some ground on slight fall in the single European currency’s demand on April 29 and gained 40 paisa against the euro and traded at Rs63.25 and Rs63.55. Slight setback in the international market forced the single European currency to give up its long stability versus the major currencies.

On April 30, the euro shrugged off its overnight slump and hit an unprecedented level at Rs64 versus the rupee, recovering its lost ground by 80 paisa to trade at Rs64.05 and Rs64.35. On May 2, euro hit all time high against the rupee reaching Rs65 mark. It closed the week at Rs64.70 and Rs65, up 65 paisa over the overnight level. The rupee has lost 140 paisa in last two days trading. During the week the rupee suffered a loss of 110 paisa over the previous weekend close.

Against other major currencies at the inter-bank forex counter the rupee extended further losses versus the British pound, Canadian, Australian, New Zealand and Singapore dollars, Swiss franc, Japanese yen, Swedish krona, Danish and Norwegian krones, Malaysian ringgit, Kuwaiti dinar, Qatari riyal and UAE dirham. It however, remained unchanged against Saudi riyal, Hong Kong dollar and Chinese yuan.

In the international financial market the dollar rose broadly on April 28 aided by surging US stocks while North Korea’s willingness to end their nuclear weapons programme in exchange for unspecified demands helped underpin the dollar’s gains. With the war in Iraq considered largely over and the focus on rebuilding the shattered economy, investors focused on some upbeat corporate earnings reports that helped lift stocks and the dollar. Currency traders noted any movement toward solving the North Korea nuclear standoff would remove a major source of geopolitical instability and put the struggling dollar in a positive light.

The euro nearly hit a fresh four-year high against the dollar, touching $1.1078 before sliding back to $1.0986, a loss of 0.41 per cent. In the Asian trading session, the euro came within a whisker of a four-year high against the yen before tumbling back to 132.26 yen, off 0.40 per cent on the day. The dollar rose to a session high 120.47 yen, up 0.25 per cent on the day. Activity in Asian markets was generally thin as Tokyo traders were sidelined for the “Golden Week” holidays from late April to early May.

Sterling extended last week’s gains to reach a 1-1/2 month peak against the dollar as a recent run of poor US data fanned concerns about the US economy and pressured the greenback. It had risen to $1.5984 from $1.5911 in late New York last weekend. Against the euro it held steady at 69.26 pence, within around half a pence of its four-year low of 69.77 set last week.

A promising start for the dollar turned into a train wreck on April 29 after surge. In April, US consumer confidence was not enough to sustain the greenback’s gains before a sharp sell-off ensued. Welcome news from the US consumer sector brought about a surge in the dollar’s value and a rally in the stock market, however, currency investors, looking for a chance to buy the euro as it fell, were disappointed by its quick rebound, forcing them to buy it back in a short-cover squeeze.

The squeeze sent the euro up near its four-year high of $1.1084 despite news of weak European economic data as well as indications the European Central bank was not preparing interest rate cuts for its meeting on May 8. In late New York the euro rose to $1.1067 a gain of 0.76 per cent on the day after dipping as low as $1.0935 after the confidence numbers were released. The dollar spiked to a high of 120.72 yen before falling back to the session low 119.64 yen a loss of 0.65 per cent on the day. The dollar climbed as high as 1.3778 Swiss francs before tumbling back to 1.3621 francs, a loss of 0.67 per cent on the day. Sterling kept a close eye on euro/dollar trading patterns with a late-session surge in the single currency wiping out much of the unit’s morning gains that were driven by upbeat British data. In late European trade, the pound was down on the euro and steady on the dollar, after having relinquished gains against the two major currencies when the euro staged a sharp comeback against the dollar despite good US economic signals.

The pound had initially drawn support from retail sales and consumer confidence data that suggested the British economy was beating its recent downturn, bringing up future interest rate expectations. Sterling was down 0.16 per cent against the euro on the day at 69.22 pence, after having hit session highs around 68.88 in morning trade. The pound was steady against the dollar from the previous session’s close at $1.5900, but down from session highs of $1.5931.

On April 30, investors pushed the dollar to a four-year low versus the euro uninspired by a weak Midwest US manufacturing report and a cautiously optimistic economic outlook from Federal Reserve Chairman Alan Greenspan. The problem with the dollar is that even though the United States is outperforming the euro zone economy, the extent is not significant and overall the pace of US economic growth remains lacklustre. As a result, the record high US current account deficit and negative interest rate differentials stand out that have become the main factors driving the dollar lower.

The euro hit a fresh four-year high of $1.1187 in mid-morning New York trade and held its ground. By afternoon, the euro traded at $1.1170, up 0.88 per cent for the day. The euro backed away from a four-year high of 133.35 yen to trade at 132.82 yen, up 0.20 per cent on the day. The dollar took a sharp turn lower against the yen, trading at 118.89 yen, its lowest point in nearly a month, representing a loss of 0.74 per cent on the day.