THE dollar came under heavy selling pressure last week. Panic- selling of dollar helped the rupee to recover significantly in inter-bank as well as in kerb trading.

In the inter-bank market, the rupee gained 80 paisa against the dollar on the opening day of the week. It traded at Rs63.20 and Rs63.30 on October 1, against Rs64.0 and Rs64.05 at the previous weekend close. General demand for dollar has declined since the September 11 events. Major market players have sidelined. Panic-selling persisted on October 2, amid low demand for dollar, which further helped the rupee to gain an impressive Rs1.20 in a single day trading. It touched new highs against the dollar trading at Rs62.40 and Rs62.45.

The dollar, however, recovered some of its lost ground on October 3, helped by the rumours the central bank intends to take supportive measures to halt dollar free-fall. The rupee failing to sustain overnight levels lost 20 pasia, trading at Rs62.60 and Rs62.65 against the dollar. Though general demand for dollar remained low on October 4, dollar buying by importers pushed the rupee down further. It lost another 20 paisa to trade at Rs62.80 and Rs62.85, still registering a net gain of Rs1.60 over the dollar in four days trading. On October 5, the rupee gained 10 paisa in mixed trading. The dollar was quoted at Rs62.70 and Rs62.75 at 5, the rupee gained 10 paisa in mixed trading. The dollar was quoted at Rs62.70 and Rs62.75 at close. On October 6, the dollar was trading at Rs62.55 and Rs63.05 at the NBP counter in the early session.

Against other major currencies the rupee at the inter-bank counter, continued to show strength versus British pound, German mark, euro, Canadian, New Zealand, Hong Kong and Singapore dollars, Swiss, French and Belgian francs, Dutch gilder, Italian lira, Spanish peseta, Swedish krona, Danish and Norwegian krones, Austrian schilling, Japanese yen, Chinese yuan, Malaysian ringgit, Kuwaiti dinar, Saudi and Qatari riyals and UAE dirham, Australian dollar was the only currency against which the rupee lost ground.

In kerb dealing, the rupee witnessed volatile market. The parity gained significantly in the first two days of trading. After coming under panic selling, the dollar lost ground to rupee shedding Rs2.40 in a single day trade on October 1. The rupee was at Rs64.10 and Rs64.30 against the dollar as against the previous weekend close of Rs66.40 and Rs66.70. The dollar continued to fall versus the rupee and touched fresh lows at Rs62.80 and Rs63.40 during the week as soaring rupee gained another Rs1.20 reducing the gap between the open market and inter-bank rate considerably to only 40 paisa for buying and 65 paisa for selling. It was the lowest in recent months.

The trend, however, reversed in the following two days as heavy dollar buying by importers and some banks resisted further gains in the rupee value. It lost 30 paisa on October 3 and another 40 paisa on October 4 against the dollar which traded at Rs63.50 and Rs 63.80 against the overnight level of Rs63.10 and Rs63.40. There was thus a net appreciation of Rs1.60 in the rupee value versus the previous weekend close of Rs66.40 and Rs66.70. On October 5, the open market witnessed slight revival in demand for dollar amid thin activity although general public seem hesitant in fresh buying. The rupee lost 110 paisa for buying but remain unchanged for selling. At close, the dollar was quoted at Rs64.60 and Rs64.80 during the week as a whole there was a net appreciation of 118 paisa.

At present the market is uncertain about the future trend in the rupee/dollar parity. There has been some positive developments, in the past one-week. Lifting of the US sanctions against Pakistan, release of IMF credit and rescheduling of debt by some countries are expected to help the rupee recover significantly. Some market players had even predicted the rupee to touch Rs60 mark. But clouds of war are hanging over Afghanistan since September 11 events and development thereafter have sidelined leading investors making the rupee movement vis-a-vis dollar unpredictable.

On the international front the dollar hit a three-week high against the yen in New York on October 1, after a survey of the US manufacturing beat market forecasts but did not entirely factor in the effects of the September 11 attacks on the United States. The yen fell through the psychologically important 120 level after the US data. The dollar’s run against the yen picked up speed and it changed hands at its highest level since September 11 at 120.43 yen, before easing back to 120.20, up 0.56 per cent on the day. The euro bought 110.22 yen, a fresh one-month peak, and 1.28 percent higher than its prior US close.

In Tokyo, the dollar was in a temporary upward phase due to the short-covering needs. The weak tankan data induced some dollar-buying but in general activity was thin. The dollar stood at 119.83/87 yen from 119.36 yen at previous weekend close in New York. The euro was at $0.9092/97, down from $0.9105. Against the yen, the single currency stood at 108.81/92 yen from 108.66 yen.

In London, sterling has been boosted by a host of supportive factors, from talk of acquisition activity to stronger than expected data. The pound rose above $1.48 for the first time since early February, sustaining gains of almost half a per cent on the day. The pound also rose to more than two-week highs against the euro, around 61.60 pence. But it fully erased these gains in the late European session as the euro staged a broad-based rebound, notching up gains of half of per cent against the dollar and almost one per cent against the yen.

On October 2, the dollar fell from three-week highs against the yen and moved lower against the Swiss franc and sterling in New York trading whipsawed by the US economic and political uncertainty, but moderated its losses after a survey of service-sector activity beat market expectations. In early US trading, the dollar retreated from its overnight peak near 121.50 yen - its highest level since September 11 - changing hands around 120.70 yen for a slight loss on the day. The euro traded 91.85 cents, well off its London trading highs and flat on the day, after the NAPM data. Europe’s common currency bought 111 yen, well off its London trading high near 111.80 yen and unchanged from its previous US close.

In Tokyo, the dollar was well supported helped by slightly better-than-expected news on the US economy and verbal intervention by the Japanese officials. Uncertainty over the developments in Afghanistan also dampened gains and gave broad support to the euro. The dollar was at 120.30/35 yen from 120.16 yen, but shy of an offshore peak at 120.45. The euro stood at 110.37/45 yen against 110.22 yen. It climbed as high as 110.47 yen in offshore trade. Against the dollar, the euro held steady around $0.9170/75 against $0.9173.

In London, the sterling fell one per cent against the euro and the dollar after the Prime Minister Tony Blair squashed speculation that joining the euro was off the agenda as a result of the September 11 attacks on the US. Sterling’s response was to retreat from its eight-month peak set on October 1 and stage its biggest one-day fall since early June. The pound fell to one-week lows of $1.4621 from eight-month highs of $1.4813. Nevertheless, sterling was off seven per cent from 15-year lows of $1.3677 hit on June 12 and dealers said its uptrend was intact unless levels near $1.4550 were broken. Against the euro, the pound also shed on percent from late New York levels to 62.57, having hit two-week high of 61.55 on October 1. The pound surged to an eight-month high of $1.4813.

On October 3, the dollar climbed against the euro as the US attacks rallied and the US government said a new stimulus package to boost the economy after the September 11 attacks could total up to $75 billion. The yen, meanwhile, rebounded from a five-month low against the euro and a three-week floor against the dollar as traders booked profits from the Japanese currency’s sharp losses in the past two weeks. The dollar rallied nearly half a percent to day highs near 91.40 cents in midday trading as blue-chip on the Wall Street stocks gained more than 1 per cent and technology shares surged 5.4 per cent. The dollar traded near 120.50 yen, having tumbled a full yen from its overnight peak near 121.50 yen. The euro also shed around 1-1/2 yen from its 5-month peak of 111.76 yen to around 110.50 yen.

In Tokyo, the dollar held firm against the yen after the US Federal Reserve trimmed borrowing costs by half a percentage point to the lowest level in early four decades. While shy of an overnight peak of 121.14 yen, the dollar fought off an early bout of profit-taking to stand at 120.82/86 yen by late morning. That compares with 120.70 yen in late offshore trade.

In London, the pound stabilized erasing most of its losses made in the previous session after the Prime Minister Tony Blair reaffirmed his euro policy, as the market still saw many hurdles before entry would be possible. The pound erased losses made in the previous session to stand at 62.20 pence, equivalent to 3.1432 marks. Having delved to $1.4615 against the dollar on October 2, sterling clambered back to $1.4760, putting it close to an eight-month high of $1.4813 set on October 1.

On October 4, the dollar drifted lower against the yen in Tokyo due to follow-through sales after its failed to sustain recent highs above 121 yen, but there was no aggressive liquidation, with operators still wary of the Japanese intervention.