The dollar is gaining strength in the local market as a result of buying by the State Bank of Pakistan (SBP) from interbank market. At the same time, heavy payments at the fiscal end amid short supply of dollars has pushed rupee down in the open market.

Dollar's rising value is widening the gap in the open and interbank market rates. The rupee this week remained under pressure in the local market against the dollar. However it managed to rebound against the European common currency as euro lost its firmness versus the dollar in the international market.

On the opening day of the week, rupee-dollar parity rates went up in the interbank market and was quoted at Rs57.60 and Rs57.62 on May 10, with the rupee shedding five paisas versus the dollar.

Continued dollar demand for payments pulled the rupee down further on May 11, as it extended its slide versus the dollar, losing eight paisas to trade at Rs57.68 and Rs57.70.

The local currency shed one paisa more against the dollar on May 12, changing hands at Rs57.69 and Rs57.71, as opposed to some market analysts who were anticipating the dollar to sustain its firmness on banks' aggressive buying to meet payment requirements.

The rupee's fall was in line with the weaker regional currencies on growing expectations of an early interest rate hike in the US. In three days of trading since the week started, the rupee has shed 15 paisas versus the green back.

The banks have indulged in aggressive dollar buying to meet their customers demand. Widening trade deficit and falling workers' remittances have lowered the supply of dollars in the market.

On May 13, the rupee extended its slide versus dollar as it broke an important mark of Rs57.50 in the interbank market, shedding one paisa against the dollar, changing hands at Rs57.70 and Rs57.72, amid improved dollars' demand.

On May 14, the rupee recovered modestly versus the greenback and gained one paisa more over its overnight levels to trade at Rs57.69 and Rs57.71. During the week, the rupee in the inter bank market lost 16 paisas versus the dollar.

In the open market, the rupee, on May 10, lost four paisas versus the dollar and traded at Rs58.07 and Rs58.12 due to rising value of the greenback. The rupee lost 10 paisas more versus the dollar on the following day, changing hands at Rs58.17 and Rs58.22 on May 11.

The local currency gained strength on May 12, as the central bank sold dollars to ease pressure on the rupee. The State Bank's move helped the rupee to recover seven paisa versus dollar in the open market to trade at Rs58.10 and Rs58.15, amid low activity due to local holiday for by-election in the city.

Both foreign and local banks indulged in fresh dollar buying to meet payments requirement on May 13. The rising oil prices in the world markets and a significant surge in inflation rate pushed the dollar value up in the open market.

Aggressive dollar buying in the interbank market forced the rupee to give up its firmness in terms of the greenback in the open market, dropping 10 paisas at Rs58.20 and Rs58.25.

The demand for dollars persisted in the open market on May 14, as the rupee extended its fall, shedding ten paisas over its overnight levels. The dollar changed hands at Rs58.30 and Rs58.35, as the interbank market continued buying dollars from open market to meet payment requirements.

If the demand for dollars persisted further, the rupee might cross the mark of Rs58.50 in the coming days. This week the rupee in the Kerb lost 28 paisas against the dollar.

The rupee showed an upward trend this week versus the European single common currency. On the opening day of the week, it gained Rs1.25 in terms of the euro, changing hands at Rs68.64 and Rs8.95 on May 10. The rupee, however, failed to hold ground and lost 20 paisas in terms of euro to trade at Rs69.15 and Rs69.45 on May 11.

The decline in local currency was short lived as on May 12, the rupee managed to recover ten paisa versus euro, trading at Rs69.05 and Rs69.35. The rupee further gained five paisa against the euro, which changed hands at Rs69.00 and Rs69.30 on May 13.

The local currency gained another 10 paisas versus the euro trading at Rs68.90 and 69.20 on May 14. The rupee this week gained 90 paisas over the European single common currency.

In the international financial markets, the dollar rolled higher across the board on May 10 hurting high-yielding currencies and pushing the yen to an eight-month low as accelerated expectations of higher US interest rates gripped the market.

The euro fared better than the yen, which fell more than one per cent to its lowest level since a G-7 call last September for more exchange rate flexibility. But the euro was still close to a recent 5-1/2 month trough. In New York, the euro was around $1.1827, off about 0.48 per cent.

Sparking the dollar's rally was last weekend's unexpectedly strong US non-farm payrolls report showing 288,000 new jobs created in April. That heightened market speculation the Federal Reserve could raise interest rates from just one per cent as soon as June. The yen was stung by tumbling stock prices. Against the yen, the dollar climbed to 114.00 yen, up about 1.5 per cent.

The euro was at 134.91 yen up about 1.1 per cent. Against the Swiss franc, the dollar was nearly flat at 1.3013 francs. Sterling was down 0.7 per cent to $1.7738. The Australian dollar lost about 1.4 per cent against the US currency, trading around US$0.6915.

On May 11, the dollar moved higher against the euro with traders focused on prospects for higher US interest rate. In New York, the euro was trading near $1.1820, down about 0.2 per cent.

Against the Japanese currency the dollar was at 113.64 yen down about 0.1 per cent. The greenback was still within sight of previous day's peak of 114.14 yen, its strongest since September. Against the Swiss franc, the dollar was up 0.4 per cent to 1.3038 francs.

The pound sagged against both the euro and dollar after news that British manufacturing output fell again in March. Sterling was down about 1.2 per cent at $1.7555, after hitting five-month lows earlier around $1.7535.

On May 12, the dollar fell against the euro on news the US trade deficit widened more than expected in March, the largely to a spike in oil prices. The March trade gap was $45.96 billion, easily overshooting economists' forecasts for a $42.60 billion deficit.

Earlier it held steady against the euro and yen but stayed off recent peaks as rising Tokyo stocks lifted the Japanese currency and a Federal Reserve official's comments tempered the US rate hike enthusiasm.

In New York, the euro was trading at $1.1894, up about 0.2 per cent. If the euro were to close above about $1.1950 that could pave the way for a move up to about $1.2150.

Against the yen, the dollar was trading at 113.26 yen, up about 0.2 per cent. Against the Swiss franc, the dollar was down about 0.4 per cent to 1.2920 francs. Sterling was up one per cent to $1.7763, partly on signals of future UK interest rate hikes.

The New Zealand dollar rose more than one per cent against the greenback, receiving help from strong employment data that painted a robust picture of the domestic economy.

On May 13, the dollar held its gains after a trio of reports signaled fairly strong US economic growth, affirming currency market expectations of dollar boosting interest rate hikes during the summer.