The rupee in the local currency market showed an upward rising trend versus the dollar and euro this week. Though demand for dollar existed in the market which exerted pressure on the rupee during the most part of the week, but smooth dollar supply helped the rupee to hold ground versus the American currency.

The euro weakness versus leading currencies in the world market, on the other hand helped the local currency to hold its firmness versus the European single common currency.

The rupee-dollar official parity rates moved slightly in the interbank market amid slow trading on the opening day of the week. The rupee did not fluctuate sharply and traded at last weekend's level of Rs60.43 and Rs60.44, despite strong demand for dollars on August 13.

On August 14, the market was closed being Independence Day holiday. On August 15, the inter bank market resumed trading after a day gap. The rupee firmed up versus dollar picking three paisa on buying counter and two paisa on selling counter to trade at Rs60.40 and Rs60.42. There was lack of interest amongst the small investors, amid dull trade.

However, hectic dollar buying by importers was observed on August 16. Both the foreign and local banks indulged in hectic buying of dollar to meet the payment requirements. Strong demand for dollars by the importers pushed the rupee value down against dollar during the day. The rupee shed five paisa against the dollar on the third trading day of the week in review, whereas the dollar was seen changing hands at Rs60.45 and Rs60.47.

On August 17, bearish trend persisted in the interbank as the rupee further shed two paisa against dollar for buying and one paisa for selling on higher demand by the importers. The dollar traded at Rs60.47 and Rs60.48 on the day. In the past one week, however, the rupee lost four paisa versus the American currency in the inter bank market.

In the open market, the rupee showed a stable trend against the dollar, changing hands at its previous week close level on the buying counter, while posting a decline of three paisa on the selling counter on the opening day of the week, when it traded at Rs60.80 and Rs60.88. Trading in currencies remained suspended in the local market on August 14 on account of Pakistan's 60th Independence Day. On August 15, open market commenced trading on a happy note as the rupee managed to gain five paisa against the dollar, trading at Rs60.75 and Rs60.82.

On August 16, the remained unchanged against dollar on the buying counter but lost three paisa on the selling counter changing hands at Rs60.75 and Rs60.85. On August 17, the rupee did not move any side against dollar for the second consecutive day on the buying counter, while recovering five paisa on the selling counter to close the week at Rs60.75 and Rs60.80. During the week in review, the rupee, on cumulative basis, managed to recover five paisa on buying and eight paisa on selling against the dollar in the open market.

Versus the European single common currency, the rupee weakness persisted on the opening day of the week. It lost nine paisa and traded Rs82.90 and Rs83.00 versus the euro on August 13, against previous week close of Rs82.81 and Rs82.91. However, when the market opened on August 15, after a day break on August 14, the rupee managed recover 16 paisa against the euro, changing hands at Rs81.74 and Rs81.84, as single European currency fell versus the dollar in the world markets.

On August 16, the rupee retained its overnight winning streak and further extended its overnight firmness by gaining 27 paisa in relation to euro, which traded at Rs81.47 and Rs.1.57. It further extended its gains against euro, picking up 20 paisa on August 17 to trade at Rs81.27 and Rs81.37. The rupee thus registered a total recovery of Rs1.54 in relation to the European single common currency this week.

In the international financial market, the euro fell to a one-month low against the dollar on the week's opening day after the European Central Bank pumped cash into the banking system for a third straight day to soothe a market rattled by US subprime mortgage market problems. The euro came under pressure as investors began to lower their expectations for a rate rise in September from the ECB in the face of turbulent credit markets. Analysts said the euro would continue to weaken as a European rate rise becomes less likely.

In New York, the euro was down 0.6 per cent against US dollar at $1.3604, a one-month low on August 13. The greenback fell 0.11 per cent against the yen at 118.23 yen, up from an intraday low of 117.66. High-yielding currencies such as the British pound and New Zealand dollar also declined against the US dollar, as investors unwound carry trades where low-yielding currencies are borrowed and then sold to buy higher yielding ones. The pound was down 0.6 percent versus the US dollar to $2.0120 and the New Zealand dollar slipped 0.91 per cent to US $0.7391.

On August 14, the dollar rose to a one-month high against a basket of major currencies as growing signs that US credit market turmoil is spreading overseas left investors seeking safety. News that a Canadian trust was not able to repay some short-term debt sent investors slashing their bets against the greenback, particularly after last week's news that French bank BNP Paribas had frozen some funds because of subprime concerns.

The euro was down 0.5 per cent to $1.3532 the lowest in six weeks. The dollar was down 0.5 per cent at 117.63 yen, as major US stock indexes all fell more than 1 percent. Sterling dipped below $2.00 after UK July inflation came in below the Bank of England's 2 percent target rate for the first time in over a year. It last traded at $1.9980 against the dollar, down 0.7 percent. The Canadian dollar fell more than 1 percent to C$1.0660 per US dollar.

On August 15, the yen climbed to 4-1/2-month highs against the euro, and the dollar rose as investors, weary of worsening credit sector problems, abandoned higher-yielding currencies and risky assets like equities. However, the Japanese yen soared against the Australian and New Zealand dollars as investors pared back carry trades, in which low-yielding yen are borrowed to invest in higher-yielding assets.

Renewed concerns about the credit markets triggered unwinding of positions with the dollar and the yen posting further gains against most currencies. The dollar fell early against the yen, then recovered, only to decline again as the S&P 500 index turned negative on the year. The dollar was down 0.7 per cent at 116.75 yen near intraday lows of 116.62, according to Reuters data. The dollar rose 0.65 percent to 1.2185 Swiss francs.

The euro fell by 0.64 per cent against the dollar at $1.3448, sliding for a third straight day in its worst decline in six months. Investors fretted about European exposure to the US subprime mortgage sector, prompting speculation that the European Central Bank would not lift interest rates next month as previously expected. Sterling hit a two-month trough against the dollar and its lowest level in more than four months versus the yen as weak labour market data further scaled back expectations for UK interest rate rises. It was down 0.1 per cent at $1.9933, having earlier hit a 2-month low of $1.9857.

On August 16, the yen had its biggest rise against the dollar in six months in volatile trading as investors fearing a global credit crisis exited risky trades financed by borrowing the Japanese currency. In the last two months, the dollar declined from 124.16 yen in June to a 14-month low reached around 112.00 on August 16. In late New York trading, the dollar was two per cent lower at 114.20 yen. The euro was flat against the dollar at $1.3425. Sterling lost more than two per cent against a surging yen on. The yen shot up, sweeping the dollar to a one year low. Sterling was down 0.2 per cent at $1.9823.

At the close of the week on August 17, the yen pushed towards a 14-month peak against the dollar in hectic trade, pushing the dollar down two per cent to a session low of 112.10 yen near a 14-month low of 112.01 hit a day earlier, when the US currency lost as much as 4 percent against the yen. The dollar has slumped about 10 percent from a 4-1/2-year high just above 124.00 yen hit in June. The dollar was at 112.35 yen late in the Tokyo session, after bouncing in a 112.10-114.65 yen range in frantic trade. The pound was up 0.4 percent versus the dollar at $1.9920.