Despite increased demand for dollars in the local currency markets this week, the rupee remained range bound. Due to matching supply of dollars with demand , the rupee-dollar parity rates fluctuated between Rs58.85 and Rs58.88 in the interbank market and between Rs59.05 and Rs59.20 in the open market.

Major factor which eased pressure over rupee was the State Bank's strict watch over fluctuation in the rates. The demand for dollars was high on the opening day of the week.

On August 16, the rupee gave up its last week's firmness versus dollar in the interbank market, and lost three paisas on August 16 to trade at Rs58.83 and Rs58.85, on rising demand for dollars by corporate sector. The rupee resisted further slide versus dollar on exporters' dollar sales and changed hands at Rs58.82 and Rs58.85 on August 17.

Firmness prevailed in the interbank market as the rupee did not show a major change in its overnight levels versus dollar, which traded at Rs58.81 and Rs58.84 on August 18. supply is enough to meet the requirements.

The State Bank supported the rupee by selling dollars in the market after the local currency hit a two-year low of Rs59.35 versus dollar. On August 19, Rising trend prevailed as the rupee posted fresh gain of three paisas against the dollar, trading at Rs58.78 and Rs58.80.

The parity did not fluctuated sharply on August 20, due to sufficient supply of dollar in the market. The State Bank was selling dollars to meet the market requirements. Consequently, stable trend was witnessed in the inter-bank market during the day.

The rupee recovered two paisas versus the dollar to trade at Rs58.76 and Rs58.78. Over the previous weekend the rupee managed to recover three paisas against the dollar in the interbank market this week.

As opposed to interbank trend, the rupee in open market managed to gain two paisas against dollar to trade at Rs59.05 and Rs59.15 on August 16. On August 17, range-bound trading was seen in the open market as the dollar was available at Rs59.10 and Rs59.15 amid persistent demand. The rupee maintained its overnight levels on August 18 and traded at Rs59.10 and Rs59.15.

No major change was witnessed in the parity in the open market on August 19. The rupee inched up slightly showing only one paisa gain versus the dollar. It changed hands at Rs59.08 and Rs59.15 amid process of trading.

On August 20, the rupee managed to hold on to its overnight levels versus dollar and traded at Rs59.08 and Rs59.15, amid modest trading. The parity did not show any change over the week in the open market.

Versus the European single common currency the rupee crossed Rs73 mark this week. It lost 75 paisas on August 16, and traded at Rs72.60 and Rs72.90, as the single European currency posted fresh gains in international markets.

On August 17, the local currency lost 15 paisas to change hands at Rs72.75 and Rs73.05. It recovered 25 paisas versus euro and traded at Rs72.50 and Rs72.80 on August 18. But it failed to hold ground on August 19, and lost 20 paisas and to trade at Rs72.70 and Rs73.00.

The single European currency appreciated on expanding its ground in the world markets. On August 20, the rupee continued its weakness versus euro and shed 10 paisas to change hands at Rs72.80 and Rs73.10. During the week the rupee lost 95 paisas against the dollar.

In the international financial market, the dollar posted modest gains against most major currencies on August 16, after a report on flows into US assets showed enough of a rise in foreign investments to offset the current account gap for the month.

But the dollar's gains were limited, suggesting that bearish sentiment toward the currency still dominates these range-bound markets of late summer. Earlier the euro recouped some losses after a report showing activity in New York state factories slowed sharply in early August.

In New York, the euro dipped to around $1.2360, down about 0.1 per cent from $1.2374 in late New York trade on August 13. Against the Swiss franc, the dollar was up 0.2 per cent at 1.2405 francs.

Sterling was down 0.3 per cent at $1.8408. Against the yen, however, the dollar fell to 110.45 yen from 110.70. The euro, in trade against the yen, slipped 0.3 per cent to 136.47 yen. The yen's gains against Europe's single currency helped support it against the dollar.

Sterling slipped against the dollar after touching a three-week high as a rebound in US capital inflows data lifted the greenback, with the pound still subdued by dwindling British rate hike expectations.

It traded a quarter per cent lower on the day at $1.8419. It had briefly hit a three-week high of $1.8467 earlier in the session while holding above recent one-month lows against the euro.

The dollar benefited from data showing foreign investment in US assets rebounded smartly in June. Investors had to wait until later in the week for key British data after the pound recently suffered from the bank of England's dovish-sounding inflation repot last week.

On August 17, the dollar eked out marginal gains against the euro as the market digested a slew of US economic data that failed to substantially alter the outlook for gradual increases in US interest rates.

The muted US inflation data hinted the Federal Reserve will stick to its path of Measured" rate increases. The Japanese currency gained across the board, thanks mainly to heavy buying on the crosses, particularly the euro and sterling.

An early retreat in oil prices helped fuel the yen's gains, although New York-traded crude recovered in the afternoon the climbed back well above $46 a barrel. This helped lift the euro off its lows against the yen to around 135.91 yen still weaker on the day, however.

Sterling was around two yen weaker at 201.19 yen. Against the Swiss franc, the dollar traded at 1.2432 francs, up about 0.2 per cent, while sterling, a big loser traded at $1.8277 down about 0.65 per cent.

In New York, the euro was trading around $1.2350, a touch weaker than $1.2359 the previous day. It had traded as high as $1.2387 before retreating. The dollar traded at 110.05 yen down about 0.4 per cent. The pound was also half a per cent lower against the dollar, at $1.8320, moving further away from three-week highs scaled on August 16.

On August 18, the dollar was a little stronger against the main European currencies but weaker against the yen with the Japanese currency rallying across the board as dealers adjusted positions.

There was no major economic news driving the yen higher, although its rise against sterling following the release of relatively dovish minutes from the Bank of England's Monetary Policy Committee earlier in the day was a factor.

In New York, the euro was down 0.7 per cent against the yen at 134.88 yen, while sterling was at a six-week low around 199.44 yen. That helped drag the dollar down nearly 0.5 per cent to 109.33 yen, and the euro was down against the dollar by around 0.1 per cent at $1.2337. Sterling was about 0.2 per cent weaker at $1.8242. Against the Swiss franc the dollar was up slightly at 1.2441 francs.

Sterling hit a three-month low against the euro and slipped on the dollar as minutes from the Bank of England raised expectations British interest rate might be close to their peak. It was down a third of a per cent at $1.8214, having fallen from above $1.84 on August 17.

On August 19, the dollar weakened broadly as more violence in Iraq and another record high for oil prices prompted dealers to ignore benign US economic data and sell the currency.

It largely took the numbers in stride. But a mortar attack on the US Embassy in Baghdad and the subsequent jump in oil prices to new highs with $50 a barrel well within reach, quickly put the dollar on the defensive.

The dollar also lost a little ground against the euro after an index of US leading indicators declined more than expected. Earlier, initial US weekly jobless claims dipped to 331,000 for the latest week, below forecasts of 335,000.

The euro was at $1.2371, up around 0.3 per cent. The euro struggled to hurdle stiff technical resistance around $1.2375, while options-related selling just above that level also capped its upside.

In this light, the dollar's weakness was more pronounced against other currencies. It hit a one-month low against the yen of 109.09 yen before recovering to 109.34 yen, largely flat on the day. The Australian dollar also hit a one-month high, at $0.7257, on technical and bond-related buying.

The pound bounced from a three-month low on the euro and gained on the dollar, absorbing data showing a drop in British retail sales in July on the view this did not greatly alter the economic outlook.

With the market looking for signs that rising British interest rates are nearing their peak, the pound was sold ahead of the retail data as investors positioned for a small drop from the June rate, the first in over a year.

The pound had gained 0.5 per cent on the day, aided by broad-based dollar slippage, to $1.8310 having dipped 0.2 US cents to $1.8199 in the immediate aftermath of the data.

Against the euro it recovered to 67.45 pence, up around 0.22 per cent on the day, after forging a three-month low at 67.83 ahead of the sales data. Its trade weighted index, which earlier hit a fresh three-month low of 104.2, climbed to 104.5 in late European trade. The index has a euro weighting of 64.82 per cent, a dollar weighting of 16.49 per cent and a yen one of 7.0 per cent.

At the close of the week on August 20, the yen hit a fresh four-week high against the dollar and edged up against the euro as stronger-than-expected Japanese data gave the currency a belated boost.

The market was initially unfazed by Japan's tertiary sector index of service industry activity, which rose 0.8 per cent month-on-month in June, above economists' forecast for a rise of 0.5 per cent.