The rupee-dollar parity moved both ways in a narrow band last week. Uncertainty prevailed after the bomb blast in Karachi on May 8, which killed 15 men, mostly foreigners.

The market lacked activity in the absence of moving factor. Small number of buyers visited the market when it resumed trading on May 6. However the rupee lost 2 paisa against the dollar, amid thin activity. The dollar traded at Rs60.13 and Rs60.15 on the opening day versus previous weekend close of Rs60.11 and Rs60.13.

A slight increase in corporate demand for dollar was matched by modest dollar selling on May 7, which restricted the decline in rupee to 2 paisa. The rupee traded at Rs60.15 and Rs60.17 against the dollar. On May 8, the market lacked activity following the bomb blast. Active selling was noticed by the exporters in the absence of any major demand. The rupee recovered previous two days’ lost ground and gained 5 paisa over the overnight level trading at Rs60.10 and Rs60.12. But then it lost 3 paisa on May 9 following an improvement in activity. Major investors, however, kept themselves away from the market. The dollar was quoted at Rs60.13 and Rs60.15. The rupee did not show any change in the parity on May l0, due to a balanced demand and supply, ending the week at Rs60.13 and Rs60.15. It was, however, 2 paisa lower versus the previous weekend close of Rs60.11 and Rs60.13.

Against other major currencies the rupee at the inter-bank forex counter recovered versus the British pound, euro, Swedish krona, Danish krone, Japanese yen. It extended gains versus the Canadian dollar and the Swiss franc. It, however, lost ground versus the Australian and the New Zealand dollars, while extended further weakness against the Norwegian krone, Singapore and Hong Kong dollars, Chinese yuan, Malaysian ringgit, Kuwaiti diner, Saudi and Qatari rivals and the UAE dirham.

In kerb trading the rupee escalated in a tight band. It opened the week on a positive note gaining 10 paisa against the dollar to trade at Rs60.20 and Rs60.30 on May 6, against Rs60.30 and Rs60.40 on May 4. Balanced demand and supply of dollar on May 7, helped the rupee to recover another 5 paisa over the overnight level to trade at Rs60.15 and Rs60.20. Bomb blast on May 8, reversed this trend. The market noticed renewed demand which pushed the rupee down 5 paisa for buying and 10 paisa for selling to trade at Rs60.20 and Rs60.30 against the overnight level of Rs60.15 and Rs60.20.

On May 9, the rupee lost another 5 paisa in the kerb amid uncertainty. Thin activity was noticed in the market. The dollar was quoted at Rs60.25 and Rs60.35. Lacklustre activity in the kerb on May 10, amid prevail uncertainty pulled the rupee 5 paisa up against the dollar. It ended the week at Rs60.20 and Rs60.30, 10 paisa higher than the previous weekend close of Rs60.30 and Rs60.40, and revealing 7 paisa gap between the inter-bank market and the kerb rates as against 19 paisa in the previous week.

In the international financial markets, the dollar rose modestly from last week’s 2002 lows against the European currencies and a two-month floor versus the yen on May 6 as the dealers covered short positions, but was submerged by the market skepticism over the US economic rebound. the market activity was thinned by the holidays in Europe and Japan, prompting traders to cover short dollar positions. At the US the euro oscillated 91.65 cents against the dollar, threatening to hit a new 6-month high above the previous week’s benchmark at 91.75 cents.

It bought 127.25 yen, up 0.20 per cent on the day and nominally above the previous week’s two-month low below 127 yen. Yen futures traders noted a reported dollar yen knockout option with a strike price of 126.50 yen, which should offer the dollar near-term support.

The dollar eased from 7-month lows against the Swiss franc and the pound. Against the Swiss franc, the dollar traded near 1.5884 francs, and changed hands versus sterling near $1.4670. The euro was calm after France reelected President Jacques Chirac in a widely expected landslide victory over far-right anti-euro candidate Jean-Marie Le Pen.

On May 7, the dollar hit two-month lows on the yen and seven-month troughs on both the euro and the Swiss franc in Tokyo despite escalating warnings of intervention from the Japanese officials, worried that a strong yen could hurt exports. The dollar’s latest fall was in large part due to a sell-off on the Wall Street, which found little solace in a near universal expectation that the Federal Reserve would not tighten the policy.

Having dipped to a two-month low of 126.76 yen in Tokyo the dollar stood at 126.95/00 yen. The dollar has been falling steadily for a month and is fast approaching the trough for the year at 126.36. The yen recouped a little of its recent losses on the euro to stand at 116.47/58 from l 16.74 in New York. The euro notched up a new high on the dollar at $0.9188, just managing of clear New York’s $0.9185 peats, but traders reported stubborn option-related offers around 92 cents which soon dragged it back to $0.9174/79. In London, the sterling handed back some of its recent gains against the dollar as investors who had bet the greenback would continue last week’s slide were forced to cover positions. The news of a sharp rise in the US productivity and a firmer start on the Wall Street helped knock sterling a third of a per cent to $1.4640, down from six-month highs above $1.47 last week.

Against the backdrop, the sterling was able to recover to 62.30 pence per euro from four month lows of 62.60 set last week. The sterling showed little reaction to a newspaper report that the Bank of England governor would not oppose the Britain switching to euro if the government and the public decided on such a move.

The dollar gave up earlier gains against the yen on May 8, having trouble extending it rally from the two-month lows on modest selling from the Japanese exporters. While helped by a steadier Wall Street and the non-stop jawboning from the Japanese authorities, the dollar succumbed to the exporter selling at 127.91 yen in late Asia after an earlier climb near the offshore peaks of 128.39. That had compared with a two-month low of 126.76 on May 7.

The euro was a touch softer on the dollar, trading at $0.9135 from $0.9149 in late New York, while on the yen it was pressed by exporters at 116.84 yen after hitting one-month highs around 117.23 offshore. The dollar’s latest bounce came from active buying from the US funds caught short of dollars, as well as talks that the Japanese pension funds were buying into foreign bonds.

The sterling fell half a per cent against the dollar in London but managed to slightly outperform the euro which lost even more ground against the broadly firmer US currency. The pound was simply being pushed around by movements in the more heavily traded currencies.

The dollar had a very strong day. The general perception is that people have become a bit too negative on the outlook for the US equities and the US dollar. The pound was trading at $1.4598 and at 62.27 pence per euro.

The dollar rose in New York after a Wall Street rally sparked a scramble for the greenbacks. The euro fell as low as 90.32 cents before recovering modestly to trade at 90.42 down 1.1 per cent on the day. Against the yen, the dollar gained ground for a third straight day. While the US equities rally was the main impetus, it also was helped by another set of yen-softening comments from the Japan’s finance ministry.

On May 9, the dollar rode a Wall Street-inspired bounce but then lost steam in Tokyo, beset by doubts the latest rise in the US stocks may prove fleeting. Selling from the Japanese exporters and the US funds had reined the dollar at 128.57 yen off its earlier peak at 129.15 and a late New York level of 128.87. While the Wall Street’s gains offered the dollar reprieve from two-month lows of 126.76 yen on May 7, the market was riddled with doubts over its longer-term direction.

The euro took a hard hit from the rise in the US stocks, though it found solace in thin Asia trade at $0.9055 compared with an offshore low of $0.9032. The single currency was also sluggish on the yen after weak German industrial output data, standing at 116.43 yen from 116.55 late offshore. In London, the sterling was static against the dollar just above the previous session’s 1-1/2 week low after the Bank of England kept rates unchanged at four per cent. It unchanged on the day at $1.4560, having slipped to a low of $1.4530 on May 8, after a rally on the Wall Street buoyed the greenback across the board.

In New York, an anthrax scare at the US Federal Reserve gave the currency dealers another reason to sell their dollar but the main impetus behind the declines, was the stock prices. The euro popped up about half a cent against the dollar after the Federal Reserve announced in Washington that the investigators had found traces of anthrax in mail destined for the Fed.

The euro peaked at 91.13 cents, near a key resistance level, and was trading at 9O.91 cents up half a per cent. The dollar lost 0.42 per cent against the yen, which, was trading at 128.38. The yen’s case was bolstered by a sharp rise in Japan’s leading economic indicator to 80.0 in March, the third straight month it has been above the 50 boom/bust level.