RUPEE CONTINUED to display strength over dollar, amid modest fluctuations in the inter-bank market, where the parity remained higher than in the open market.

Though market witnessed slight increase in demand for dollar and hectic dollar buying by some local and foreign banks during the week, increased inflows of remittances from abroad were sufficient to meet the dollar demand. The rupee opened the market on September 30 on a healthy note, reflecting 6 paisa gain over the previous weekend close. It did not show any change in the next two days. At close on October 3, the dollar was trading at Rs59.15 and Rs59.17, against Rs59.10 and Rs59.12 on September 30. Finally, the week closed on a positive note with the rupee gaining 5 paisa on buying and 4 paisa on selling to close at Rs59.10 and Rs59.13, on October 4, up 6 paisa over the previous weekend close.

In kerb trading, the dollar slipped below Rs59 and traded in the Rs59 and Rs58.95 range this week. Demand for dollar remained low as compared to that in the inter-bank market. There has been a gradual decline in the dollar value despite the SBP support. Currently investors have lost interest in dollar due to its uncertain future and are investing in euro. During the week the rupee ruled strong versus the dollar gaining 5 paisa to break Rs59 barrier. The parity was quoted at Rs58.95 and Rs59.05 at close against the previous weekend close of Rs59.0 and Rs59.11. It close unchanged on October 5.

Demand for Euro remained, high this week and the rupee/euro parity remained fluctuated. The rupee opened the week on a negative note against the European single currency. It lost 15 paisa on September 30 and another 20 paisa on October 1, to trade at Rs58.20 and Rs58.50 against the Euro. After recovering 30 paisa on October 2, the rupee again lost 35 paisa on October 3, to trade Rs58.25 and Rs58.55. Finally the week closed at Rs58.15 and Rs58.45, with rupee gaining another 10 paisa over the euro. Euro thus gained 30 paisa over the rupee in the week.

Against other major currencies the rupee at the inter-bank forex counter remained strong versus the Singapore, Hong Kong and Canadian dollars, the Danish krone, the Swedish krona, the Malaysian ringgit, the Kuwaiti dinar, the Saudi and Qatari riyals and the UAE dirham. It continued to weakened against the British pound and the Norwegian krone. It also lost ground during the week versus the Swiss franc, the Australian and New Zealand dollars. It gained fresh ground versus the Chinese yuan and the Japanese yen.

On the international front, signs of further weakness in the US economy and the prospect of long-awaited reform of Japan’s deeply indebted banking sector weakened the dollar on September 30, pulling it lower against the yen and the euro. The dollar fell to a 1-1/2 week low of 121.10 yen before recovering to 121.73 yen, off 0.61 per cent from last week’s New York close at 122.48. Versus the euro, the dollar was near 98.73 cents, off more than 0.60 per cent from the previous session’s closing level and near a 3-week low of 98.99. Sterling hit a 2-month high against the dollar at $1.5742 before easing to trade near $1.5680. The Swiss franc hit a 3-week high against the dollar, but pared its gains to stand at $1.4760 in late trading.

The British pound rose to a three-week high against the dollar as sharp losses on the Wall Street and the signs of weakness in the US economy sent the greenback reeling across the board. The pound leapt to $1.5725 in the late European trade, up three-quarters of a per cent on the day. But it under-performed the euro, slipping beyond 63 pence to its lowest level in nearly a week.

On October 1, the dollar gained broadly against the major currencies fuelled by a strong rally on the Wall Street as investors shrugged off a report showing continued weakness in the US manufacturing sector. The yen was hurt by a mixed business sentiment survey that overshadowed hopes Japan would implement aggressive measures to heal its ailing economy.

The euro traded at 98.30 cents versus the dollar, down 0.35 per cent from the overnight close. The dollar jumped 0.69 per cent versus the yen to 122.55. Sterling hit a 2-month high of 1.5764 against the dollar, but ended the day lower at $1.5658, down 0.17 per cent. Against the Swiss franc, the dollar was up 0.78 per cent to 1.4876.

The pound was also buoyed by a survey showing Britain’s housing market remained robust. The pound rose half a per cent to a two-month high of $1.5764 but slipped back below $1.57 later in the session as the US stocks opened higher after recent losses. The yen fell against both the dollar and the euro on October 2, in the lacklustre trading, hit by a steep fall in Tokyo stocks to a 19-year low and concerns about the Japanese efforts to clean up the stifling bank debt. The dollar weakened against the euro as the Wall Street stocks gave back most of the previous day’s gains. But the US currency managed to hold in its recent range amid widespread global political and economic uncertainty.

The dollar weakened as investors took profits in equities after the previous day’s sharp climb and was further pressured by wrangling between the Bush administration and the United Nations over the terms of the UN weapons inspections in Iraq.

However, the dollar edged up in Asia, helped by a strong rally on the Wall Street and the speculation that big Japanese investors would push money into foreign bonds in the second half of the business year that kicked off this week. The dollar rose to a high of 123.19 yen - its highest level this week - from a late New York level of 122.51/61 yen, before coming back to 122.91/94 yen. The euro stood at 98.22/27 cents little changed from 98.26/31 in New York. The single currency was at 120.77/86 yen against 120.40/49 yen.

Sterling was steady against the dollar holding a penny below the previous session’s two-month highs, after a survey showed retail sales in Britain bounced back sharply last month. Sterling hit a two-month high of $1.5764 but turned tail in New York trade as the dollar gained from a strong Wall Street rally and signs as war with Iraq might be averted, at least for the time being. The pound was little changed on the day at $1.5664, about a penny down from previous day’s two-month high. Sterling was also off marginally against the euro at 0.6283 pence versus previous day’s close of 0.6272 pence.

On October 3, the yen was on the defensive in Asia on growing pessimism about the Japanese economy and a slump in the Nikkei shares, but falls on the Wall Street and concerns about the US-Iraq situation limited its decline. The dollar came under pressure against the European currencies, but was well-supported against the yen after dipping to a session low of 122.48 yen in early trade.

The dollar was quoted at 122.85/91 yen little changed from the late US close of 122.89/97. the yen stayed bearish against the euro, standing at 121.19/27 yen against 121.22/32. It rose as high as 121.40 in overseas trade. Commercial buying lifted the dollar to a session peak of 122.94 yen, but it shied away from a high of 123.35 hit in overseas trade. The steep decline on the Wall Street hurt the dollar on October 2. The dollar stayed under pressure against the European currencies, with the euro little changed.

Sterling was table to lower against the dollar down from the day’s highs after the greenback found support from the news US services sector growth picked up in September to its fastest pace since July.