THE rupee-dollar parity moved both ways in the local currency market this week. Some mixed sentiments were witnessed in the market.

The demand for dollars persisted. It continued to exert pressure on the rupee but the rupee managed to restrict any sharp fall versus the dollar, amid fluctuations, due to sufficient dollar supplies. However, the rupee continued to display weakness versus the European single common currency throughout the week.

Firm trend was seen in the inter-bank market on the week’s opening day. The rupee-dollar parity did not show any big change and remained traded at its weekend’s levels of Rs60.35 and Rs60.37. Slight improvement in supply of dollar enabled the rupee to meet the market demand resisting any fall in its value on August 21. The rupee, however, on August 22 lost two paisa and traded at Rs60.37 and Rs60.39, as some banks reportedly bought 30-40 million dollars from the inter-bank market to settle the import bills and meet importers demand.

On August 23, the rupee recovered two paisa changing hands at Rs60.36 and Rs60.38. Bullish trend was seen on August 24, as the rupee gained three paisa versus the dollar which was quoted at Rs60.33 and Rs60.35. The rupee was able to gain slight strength on the dollar buying from the open market and the State Bank of Pakistan (SBP) also helped to make the easy availability of the greenback.

Marginal changes were noticed in the rupee-dollar parity on August 25. The rupee lost one paisa versus the dollar in quiet trading. The inter-bank closing rates for dollar were at Rs60.34 and Rs60.36 amid increasing demand for the greenback. During the week in review, the rupee in the inter-bank market was slightly firm versus the US currency, gaining one paisa over its previous weekend’s rates.

In the open market, the rupee maintained its weekend levels against the dollar at Rs60.40 and Rs60.45 on August 21. On August 22, the rupee recovered two paisa, changing hands at Rs60.38 and Rs60.43. It, however, drifted lower by two paisa versus the dollar and traded at Rs60.40 and Rs60.45 on August 23. Bearish sentiment was witnessed on August 24 as extended dollar buying by the inter-bank market pushed the rates down in the open market. The rupee lost 13 paisa against the dollar, which traded at Rs60.53 and Rs60.58.

On August 25, the rupee improved on easy supply of dollars. It managed to recover eight paisa versus the dollar during the day, changing hands at Rs60.45 and Rs60.50. Compared to the previous week close, the rupee in the open market lost five paisa this week against the dollar.

The rupee’s fall versus the European single common currency continued as the local currency eased by 39 paisa on the opening day of the week in review, which traded at Rs77.33 and Rs77.43, compared to previous week’s Rs76.94 and Rs77.04. The rupee, however, gained modestly versus the euro, picking up nine paisa on August 22 and traded at Rs77.24 and Rs77.34. But on August 23, it drifted lower by two paisa against the euro to trade at Rs77.26 and Rs77.36.

On August 24, the rupee managed to recover and picked up 24 paisa versus the euro, which traded at Rs76.80 and Rs76.90 as the dollar maintained its firmness in relation to the world major currencies. On August 25, the rupee shed six paisa versus the and traded at Rs76.86 and Rs76.96, as the dollar maintained a firm posture versus the major currencies despite report of the decline in the home sales in the international market. This week, the rupee, however, managed to recover eight paisa against the European single common currency.

In the international financial market, the dollar hit a fresh two-month low against the euro on August 21, as investors shunned the greenback amid signs that the US economy is slowing. The US currency also fell against most of its other rivals, though the selling momentum that began last weekend after soft US consumer sentiment data started to ease. The gloomy market mood was heightened by expectations that the Federal Reserve would hold interest rates steady again next month, chipping away at the dollar’s yield advantage over other currencies.

A key beneficiary of dollar selling has been the euro, which climbed to $1.2939 at one point before easing back to $1.2895, still up nearly 0.6 per cent from last weekend. The single currency also reached a record high at 149.75 yen on expectations of a widening interest rate gap between the eurozone and Japan. In New York late trade, the dollar was at 149.35 yen, up 0.6 per cent on the day. It also touched 1.2184 Swiss francs, its lowest since early June. It was last at 1.2240, down 0.7 per cent.

The dollar traded flat at 115.81 yen, as rising oil prices, pushed higher after Iran said it would not meet United Nations demands to suspend uranium enrichment, weighed on the Japanese currency. The European Central Bank raised interest rates to three per cent earlier this month and signalled more hikes to come. But the Bank of Japan has said it will move slowly before following up last month’s 0.25 percentage point rate hike - the first in six years - with more tightening.

Sterling was close to three-week lows against a rising euro as the market re-assessed rate hike chances after a series of weaker data and downbeat minutes from the Bank of England’s rate meeting last week. But the pound was up sharply against a broadly weaker dollar, with investors shunning the greenback on a view that the US economy is slowing. The British currency was slightly stronger after earlier hitting a near three-week low of 68.30 pence versus the euro. Against the dollar, sterling was up 0.8 per cent at $1.8964.

On August 22, the dollar gained against major currencies, boosted by weak German economic data and a Federal Reserve official who said more US interest rate hikes may be needed to ward off inflation. Analysts said both helped propel a round of profit-taking that began after the euro failed to hold above the opening week’s two-month high at $1.2939, forcing investors to cover short dollar positions - bets the greenback would fall further.

The euro was down about 0.7 per cent at $1.2798, more than a cent off opening week’s two-month high and near a session trough of $1.2785. The dollar was up 0.6 per cent at 116.54 yen. The dollar also climbed 0.8 per cent to 1.2345 Swiss francs, while sterling was down 0.3 per cent at $1.8876. Euro selling accelerated after the ZEW economic research institute said its economic expectations indicator for Germany came in at a five-year low after seven successive months of decline.

The dollar extended its advance after the Chicago Fed president said more interest rate hikes may be needed to keep prices in check. The Fed ended a string of 17 consecutive interest rate hikes earlier this month when it kept the fed funds rate steady at 5.25 per cent, noting that slower US growth would help moderate price pressures. The central bank did not give any clear signals that the pause amounted to the end of a tightening campaign that began in June 2004, when borrowing costs stood at just 1 per cent.

Still, analysts said markets expected the European Central Bank to raise interest rates later this year from the current three per cent. Fed funds futures were pricing in less than a one-in-five chance that the Fed would raise rates in September, suggesting the dollar would soon unwind rally. Another possible source of dollar weakness may be weekend report on July existing home sales, expected to decline amid rising mortgage rates.

On August 23, the dollar edged higher versus the euro, with investors trimming bets against the greenback even as data showed a sharp decline in US existing home sales last month. The dollar initially slipped to session lows versus its main rivals on news that July home sales tumbled to their lowest level since January 2004 - more evidence suggesting the once-booming housing market is slowing and may curb US growth.

But with bets against the dollar piling up over recent weeks, selling momentum soon dried up as investors liquidated euro holdings and moved back into the US currency. Traders said it all provided a nice excuse to take profits on the single currency’s three per cent gain against the dollar since mid-July. After trading as high as $1.2852 after the housing report, the euro was at $1.2789, down slightly from $1.2803.The dollar was lower at 116.32 yen, from 116.51 yen. Sterling was at $1.8933, from $1.8881, while the dollar was flat at 1.2343 Swiss francs.

On August 24, news of a decline in new home sales failed to dent sentiment toward the dollar as the greenback gained on the major currencies. Traders said the market overbought euros earlier in the session after a rosy reading of the German business climate by research institute Ifo suggested more eurozone interest rate hikes. That helped explain why a 4.3 per cent decline in new home sales in July failed to spark more dollar selling.

In New York, the euro was down 0.2 per cent at $1.2759, near a North American session low of $1.2750. Earlier in the global session it had climbed as high as $1.2839. The single currency hit a two-month high of $1.2940 on August 21. The dollar was up 0.2 per cent at 116.52 yen, while the single currency was 0.1 per cent lower at 148.67 yen. Against the dollar, sterling was up 0.1 per cent at $1.8950.

At the close of the week on August 25, the yen dipped after a smaller-than-expected rise in consumer prices reinforced expectations that Japanese interest rates will rise only slowly, keeping it on the back foot against higher-yielding currencies. But currency moves were stifled as traders awaited a speech by Federal Reserve Chairman Ben Bernanke for possible clues about where US rates are headed. Japan’s consumer price index climbed 0.2 per cent in July from a year earlier, against expectations for a rise of 0.5 per cent.

With rates in Japan lagging well behind those of other major currencies, the yen would likely remain weighed down in the near term, traders said. Still, few in the market were keen to buy the dollar aggressively. The dollar was at 116.70 yen near the day’s high of 116.75 yen and up from around 116.55 yen in late US trade. The currency rose slightly on August 24, when investors brushed off a fall in US new home sales in July as the market had been factoring in a slide in the housing sector, traders said.

The euro inched up to $1.2775. It had slipped to around $1.2745 as dealers trimmed long positions in the euro. The single currency dipped despite a key business climate index from Germany’s Ifo institute beating expectations. Against the Japanese currency, the euro rose 0.2 per cent to 149.05 yen, inching closer to a record high 149.75 yen struck at the start of the week.