ON the opening day of last week, the Pakistani rupee was revised downward against the US dollar by 10 paisa for buying and selling at Rs60.50 and Rs60.60, respectively in the open market. On the following day, while it did not show any change for selling, it shed five paisa for buying at Rs60.55. On May 18 the Pakistani rupee dollar parity did not change as increased supply of dollars helped it to maintain its firmness.

The rupee was however, down by 20 paisa for buying and 25 paisa for selling at Rs60.75 and Rs60.85, respectively. It continued its depreciation and on May 20, it had depreciated further against the dollar, falling 15 paisa more for buying and selling at Rs60.90 and Rs61.0 respectively.

In the inter-bank market, meanwhile the rupee has drifted only slightly from Rs59.50 and Rs59.52 for buying and selling to Rs59.52 and Rs59.54, respectively.

During the week the rupee dropped against the euro. On the first day of last week, the rupee dropped by 40 paisa against the euro for buying and selling at Rs76.60 and Rs76.80 respectively. By May 19, it had slid to Rs77.10 for buying and Rs77.30 for selling.

In the international markets, the US dollar remained high last week. On May 16, in the Singapore market the dollar climbed to a seven month high against the euro as investors eyed strong US growth data, while weak commodity prices sent resource stocks such as the BHP Billion lower.

Rising US interest rates are also encouraging investors to put their money into deposits, rather than buying commodities and other products, traders said. The Fed has raised rates eight times since last June, pushing its fund rate to three percent from one percent, and the market expects the central bank to raise rates again in June.

In the London market, the dollar stabilized on May 17, near the previous day’s seven month high against the euro, as investors looked to this week’s US inflation data for clues on the pace of future interest rate rises.

Recent upbeat US activity data and better than expected trade deficit figures have boosted the dollar over the past 10 days, reinforcing the view that the Federal Reserve will keep raising interest rates to counter inflation.

The dollar’s resilience in the face on May 16 disappointing the US capital inflows report suggested it was still benefiting from an unwinding of dollar-funded carry trades following recent hedge fund losses and credit market turmoil.

In the New York market, the dollar slipped against the euro, yen and Swiss franc on May 16, after the release of a report showing capital flows into the United States shrinking in March to their lowest level since October 2003. The net inflows of $45.7 billion in March were not enough to cover the month’s $55 billion trade deficit and were well below a revised $84.1 billion inflow in February.

Economists had expected net inflows of between $60 billion and $85 billion, so the surprisingly low number, coupled with a weak survey of manufacturing in the New York area, pushed the dollar down from multi-month highs hit earlier in the session.

But traders said the decline could have been much worse, particularly given a report showing a drop in New York state manufacturing. Positive sentiment from a series of strong economic reports last week is keeping many dollars bears at bat, analysts said.

The euro was trading at $1.2636. The dollar was 0.4 per cent weaker against the yen, slipping below the 107-yen level of to 106.82 yen, and down 0.3 per cent at 1.2218 Swiss francs. Sterling recovered some losses, but was still struggling after a UK housing survey showed the slowest annual pace of house price increases since 2002.

In the Tokyo market, the dollar struck a six month high against the British pound on May 18, after the US inflation data reinforced expectations that the Federal Reserve would continue to raise interest rates at a steady pace.

The dollar also held near a seven-month peak versus the euro and a one-month high against the yen, after a hotly awaited US Treasury report did not single out China as gaining an unjust trade advantage by keeping its currency artificially low.

Traders said the US currency also benefited from a flight to dollar deposits from riskier assets such as foreign stocks amid rumours of big hedge fund losses. The sterling fetched around $1.8335 after falling as far as $1.8294, its lowest level since October 29.

The pound has dived almost 5 per cent in the last month as a string of weak economic data led many traders to bet that the Bank of England’s next move on interest rates would be down, not up as previously expected.

Meanwhile, in the New York market, the dollar dipped on May 18, after a weaker than expected US core consumer inflation report for April made it less likely the Federal Reserve will become more aggressive in raising interest rates.

The core consumer price index, which strips out food and energy costs, was unchanged from March, its first flat reading since November 2003. On a year-on-year basis, it rose 2.2 per cent, marking the second straight month the core inflation gauge moved lower. Economists had expected the core CPI readings to be up 0.2 percent and 2.3 per cent, respectively.

The dollar was further pressured by comments from US Treasury Secretary John Snow who said China must increase flexibility in its currency or risk contributing to global fiscal imbalances and raising the chances of a “boom and bust” cycle in their own economy.

Most analysts believe a more free-floating yuan would gain in value because of the world’s demand for Chinese exports. Against the Japanese yen, the dollar was down 0.6 per cent at 106.87 yen. Meanwhile, the greenback slipped against the Swiss franc, shedding 0.7 per cent at 1.2170 while sterling climbed to $1.8406.

In the New York market the dollar rose against major currencies on May 19, as optimism about the long-term outlook for the greenback overcame some negative economic reports. The dollar’s break through technical resistance levels in recent days also helped to buffer the currency from a surprisingly weak report on regional US business, as well as soft employment numbers, prices paid and new orders components. Taken together the data suggests the pace of US interest rate hikes will be measured but not aggressive.

Late in New York, the euro was down 0.3 per cent at $1.2635 after earlier falling to a session low of $1.2606 immediately after the Philly Fed data before recovering. The dollar was up 0.6 per cent against the yen at 107.62 yen and 0.4 per cent versus the Swiss franc at 1.2218 francs. Sterling’s losses against the dollar were limited by an unexpected jump in the UK April retail sales. The pound was down 0.3 per cent at $8348.

In the London market, the dollar steadied close to the week’s seven month highs against the euro and one month highs against the yen on May 20, consolidating gains made on an increasingly upbeat view of the US economy.