THE local market observed mixed sentiments this week, with the rupee/dollar parity moving in narrow range in the inter-bank market.

In the open market, however, the local currency remained under demand pressure and the US currency was seen making some sharp moves against the rupee during the most part of the week in review. Against the European single common currency, the dealers saw local currency gaining some strength, amid continued demand for euro.

The week commenced on a quiet note. No major changes were witnessed in the inter-bank market on October 2, and the rupee retained its weekend levels against the dollar changing hands at previous weekend’s Rs60.57 and Rs60.58. There was no buying pressure, while dollar supply was in comfortable position. On October 3, the rupee moved with little gains versus the dollar, trading at Rs60.56 and Rs60.57

Upward trend in rupee/dollar parity persisted. The rupee inched up and gained one paisa versus the dollar on October 4, to trade at Rs60.57 and Rs60.58. On October 5, the rupee moved in a tight range versus the dollar in the inert-bank market and traded at Rs60.55 and Rs60.56, up two paisa from its overnight levels. Range-bound trading was seen on October 6, as the rupee moved slightly versus the dollar, down one paisa at Rs60.56 and Rs60.57. During the week in review, the rupee in the inter-bank market gained one paisa against the dollar.

In the open market, however, the rupee gave up its weekend firmness, losing one paisa against the dollar for buying and six paisa for selling to trade at Rs60.58 at Rs60.68 on the first day of the week in review, after closing last week at Rs60.57 and Rs60.62. Modest gain was witnessed on October 3, as the rupee recovered three paisa against the dollar for buying and eight paisa for selling, changing hands at Rs60.55 and Rs60.60. Handsome inflows of remittances boosted the rupee’s value.

But the rupee was not able to retain its firmness due to strong demand for dollars. It surrendered the overnight gains, shedding three paisa versus the dollar which was quoted at Rs60.58 and Rs60.63 on October 4. Despite sufficient inflow of workers remittances from abroad, the US currency moved up due to higher demand by the importers on the third day of the week in review. The dollar further extended its firmness versus the rupee on October 5, and gained another two paisa for buying and seven paisa for selling to trade at Rs60.60 at Rs60.70.

Upward trend was witnessed in the open market on the fifth day of the week in review, as the rupee gained five paisa versus the dollar which traded at Rs60.55 and Rs60.65. Demand for dollars by the importers existed but continued inflows of overseas remittances returning Pakistanis ahead of Eid-ul-Fitr enabled the rupee to show firmness versus the dollar. During this week, the rupee in the open market recovered two paisa on the buying counter and three paisa on selling counter versus the dollar.

Versus the European single common currency the rupee dropped by 12 paisa on October 2, when it was quoted at Rs76.75 and Rs76.85, against last weekend’s Rs76.63 and Rs76.73. The rupee further lost 30 paisa on the following day when it traded at Rs77.05 and Rs77.15 as the single European currency again started showing its muscles on the back of dollar’s riding on October 3. It, however, gained seven paisa in terms of the euro and traded at Rs76.98 and Rs77.08 on October 4.

The rupee maintained its gains versus the euro, picking up 10 paisa and traded at Rs76.88 and Rs76.98 on October 5. It further picked up 19 paisa in terms on October 6 and traded at Rs76.69 and Rs76.79. Compared to past week, the rupee has lost six paisa versus the European common currency this week.

In the world market, the dollar slipped on October 2, snapping a six-session streak of gains, after a report showing weaker-than-expected US factory activity in September stoked fears of an interest-rate cut and exacerbated a technical move lower. Already under pressure due to the break of several key chart levels and some solid Japanese and European economic data, the dollar extended losses after an Institute for Supply Management report showed September the US manufacturing growth the slowest since May 2005.

In New York late trading, the euro was up 0.5 per cent from last weekend’s $1.2740 mark. Earlier in the global session the euro also gained support after a purchasing managers’ survey showed robust growth and rising inflation in the euro zone manufacturing sector. The dollar stood at 117.65 yen, down 0.4 per cent. Earlier in the session the dollar rose as high as 118.40 yen, the highest point in more than five months. Overnight, the tankan survey’s headline index of Japanese manufacturers’ sentiment rose to its highest level since September 2004. Against the dollar, sterling rose 0.8 per cent to $1.8870.

The dollar index, a measure of how the greenback fares against a group of major currencies, fell 0.4 per cent to 85.61, ending a streak of six consecutive increases. Robust euro zone economic data have reinforced expectations that the European Central Bank will raise interest rates by a quarter percentage point before the year ends. Even so, the euro has struggled to break out of tight ranges, and was stuck not far off the mid point of the range of $1.2460 to $1.2980 it has held for the last five months.

Sterling hovered near 2-1/2-week lows against the euro and dollar with investors looking to manufacturing sector data ahead of this week’s Bank of England interest rate meeting. The pound was down 0.17 per cent at $1.8688, having hit a 2-1/2 week low on September 29 at $1.8631. Versus the euro, sterling was down 0.18 per cent on the day at 67.78 pence, moving further away from a 15-month high hit early last week at 66.82 pence.

On October 3, a sharp decline in oil and gold prices pushed down the currencies of many commodity exporters, adding a touch of volatility during an otherwise quiet session. The dollar was steady, with many dealers on the sidelines ahead of central bank policy meetings this week in Australia, Britain and the euro zone. But the Australian dollar, Canadian dollar and the South African rand were among those hit hardest by the drop in raw materials prices.

Other analysts said the correlation between commodity currencies and raw material prices had broken down recently, but because of a general lack of volatility in the foreign exchange market, many dealers latched onto the move. US blue chip stocks closed at a record high on the decline in oil prices but did not have a significant impact on the foreign exchange market.

The US dollar was up 0.6 per cent from C$1.1220, while the Australian dollar was down 0.7 per cent at $0.7425. The dollar jumped 2 per cent to three-year highs around 7.8750 South African rand. Overall, major currencies were trapped in tight ranges as dealers looked forward to events this week to provide direction, including a speech by Federal Reserve chief and this week’s meeting of the European Central Bank at which interest rates are expected to be raised to 3.25 per cent. The Bank of England is also scheduled to meet but is expected to keep rates steady.