The rupee/dollar parity showed a fluctuating trend in the inter-bank market during the week. Following increase in dollar demand by local and foreign banks the rupee lost 4 paisa for buying and 3 paisa for selling on the opening day of the week and traded at Rs57.78 and Rs57.80 on July 7, against Rs57.74 and Rs57.75 in the earlier week.

However, it managed to recover its lost ground on July 8, in the absence of major demand and gained 3 paisa on buying and 4 paisa on selling, changing hands at Rs57.75 and Rs57.76 versus the dollar.

Local and foreign banks once again became active on July 9, on rising demand for dollar, which pushed the rupee down, reversing the overnight gains. The rupee shed 3 paisa for buying and 4 paisa for selling against the dollar on the day with trading session ending at Rs57.78 and Rs57.80. But the rupee managed to recover on July 10, on decline in dollar demand, making moderate gains of 1 paisa on buying and 2 paisa on selling to change hands at Rs57.77 and Rs57.78. The parity showed a steadier trend on July 11. Though demand for dollar existed in the market sufficient inflows restricted any fall in the rupee/dollar parity. The rupee extended further gain closing the day at Rs57.75 and Rs57.76, up 2 paisa on the overnight levels and down 1 paisa over the previous weekend close.

In the kerb, the rupee assumed a falling trend after opening the week unchanged at Rs58.00 and Rs58.05 on July 7. On the following two days, the rupee shed 16 paisa on increased dollar demand by exporters. It traded at Rs58.08 and Rs58.13 on July 8 and at Rs58.16 and Rs58.21 on July 9. The rupee further lost 4 paisa on July 10, changing hands at Rs58.20 and Rs58.25. The downtrend in the kerb continued and the rupee further lost 5 paisa on July 11, when dollar was quoted at Rs58.25 and Rs58.35, reflecting 25 paisa weakening over the previous weekend close of Rs58.01 and Rs58.05.

Against the euro, the rupee traded in a narrow band amid fluctuations. On July 7, the rupee lost 30 paisa versus the euro which traded at Rs66.65 and Rs66.95 against Rs66.35 and Rs66.65 in the previous week. However it managed to recover 50 paisa on July 8, and traded at Rs66.15 and Rs66.45 before losing 35 paisa on July 9, when euro was quoted at Rs66.50 and Rs66.80. On July 10, the rupee/euro parity remained unchanged but then the rupee unable to match demand for euro on July 11, lost 5 paisa to trade at Rs66.55 and Rs66.85. During the week, the rupee lost 20 paisa against the euro.

Against other major currencies, the rupee at the inter-bank forex counter was unchanged versus the Hong Kong dollar, the Chinese yuan, the Malaysian ringgit, the Saudi and Qatari riyals and the UAE dirham during the week. It, however, extended gains versus the British pound, the Swiss franc, the Canadian, Australian, New Zealand and Singapore dollars, the Norwegian and Danish krones, the Swedish krona and the Kuwaiti dinar. The rupee weakened against the Japanese yen, the South Korea won and the Thai bhat.

On the international front, the dollar rallied against major rivals on July 7, benefiting from a surging US stocks market and a sell-off in global bonds. The euro tumbled to a two-month low against the dollar and a seven-week low against the yen when the Tokyo stocks closed at their highest since August. The gains in global equity markets have triggered a sell-off in the global bond market, which had propped up the euro in the first half of 2003.

With the market banking on a second-half US economic recovery, the greenback was trading up almost 1.5 per cent against the euro, with the single European currency not far above its session low of $1.1315 in New York. The dollar was also sharply higher against the Swiss franc but only slightly stronger against the yen. The dollar was at 118.11 yen up 0.1 per cent. Against the Swiss franc the dollar bought 1.3719 francs, up 1.7 per cent.

Sterling fell more than one per cent against the dollar suffering in tandem with the euro as soaring stock markets prompted investors to reverse recent safe-haven trades into European government bonds. It fell to a one-week low of $1.6475 in late European trade after triggering automatic sell orders on the break of key chart levels. It was steady against the euro at 68.75 pence, holding within sight of last week’s 10-week high.

On July 8, the euro inched up to $1.1319 from 1.1318 dollar in New York. Against Japan’s yen, the dollar dipped to 118.12 yen from 118.19. The Australian dollar tumbled more than 2 per cent against the greenback, with the Canadian dollar down more than 1 per cent as they fell back from recent multi-year highs.

The Australian dollar’s slide accelerated as it splintered below some key technical levels, strategists said. Key supports were broken around US $0.6750, $0.6675, and $0.6650. Market participants who sold the Australian dollar included currency overlay managers and hedge funds, some responding to rupture of key technical levels with bouts of selling.

Over the past several months, investors have searched for higher returns outside the United States, where dollar-denominated Treasuries yields have been scraping more than four-decade lows, robust “carry trade” type flows have pushed the Australian dollar and Canadian dollar to new peaks.

Sterling tumbled over a cent to one-month lows versus the dollar and slid half a pence on the euro as investors fretted over a possible yield-damaging UK interest rate cut this week. It was down over three quarter of a per cent versus the single currency and had weakened as far as 69.21 pence per euro. It was down two thirds of a per cent against the dollar, having fallen as far as $1.6351, its lowest since June 5.

The dollar on July 9 has begun a fight back against the euro, but it needs a postwar economic bounce if it is to succeed in reversing a months-long decline. The single European currency has been pushed back to 1.1344 dollars, down from 1.1581 dollars at the start of this month and a record 1.1933 dollars May 27. But the euro remains at historically lofty levels. Last year, the euro advanced 18 per cent, breaking above parity with the dollar for the first time since shortly after its launch in January 1999 as traders fretted over the US economy - in particular a huge shortfall in the US trade and financial account with foreign countries - and global tensions.

Sterling hit one-month troughs versus the dollar and one-week lows on the euro as data showing sluggish British exports to the euro-zone reinforced concerns about a possible yield-damaging UK rate cut this week. It sterling had fallen to $1.6277 on the dollar and 69.67 pence per euro, compared with $1.6348 and 69.21 pence in late New York on July 8.

On July 10, the euro got a lift after the European Central Bank left its minimum bid rate at 2.00 per cent, opting for now not to repeat last month’s easing, which stopped a rally in the currency. The euro was last trading at $1.1386/89, up from $1.1352.58

The yen kept an upbeat tone as investors grew optimistic about the outlook for Japan’s economy on brightening corporate sentiment, robust macro economic data and the rally in stocks. The yen’s uptrend in crosses was indirectly pressuring the dollar against the Japanese unit, but the greenback’s bias was on the downside as gains in stock prices seemed speedier in Tokyo than in New York.