The rupee, after remaining stable for more than four years, significantly lost its value against the dollar during the first eleven months of the current fiscal year. The exchange rate remained much more volatile, particularly in the past three weeks, which forced the central bank to intervene in the market and adopt money tightening measures, to curb speculative trading in currencies in the local currency market thereby restricting sharp decline in the value of rupee against the dollar and euro.

The SBP efforts were fruitful in bringing down the rupee/dollar parity in reasonable range. The rupee has fallen to record lows crossing Rs70 barrier at one stage. The outgoing week observed a strong rupee with its value improving significantly against the dollar and euro. Most currency analysts, however, fear that the rupee will fall to Rs70 against the dollar in the next fiscal year.

The rupee in the inter bank market commenced the week on dismal note as strong dollar demand exerted downward pressure on the rupee which shed 15 paisa against dollar changing hands at Rs67.65 and Rs67.75 on June 9 against previous week close of Rs67.50 and Rs67.60. On June 10, the , however, failed to hold its overnight firmness against the dollar and shed 10 paisa trading at Rs67.60 and Rs67.70. On June 11, easy dollar supplies, amid dull trading in the pre budget session helped the rupee to recover 30 paisa against the dollar. The dollar was at Rs67.30 and Rs67.40 at close.

On June 12, the rupee maintained its overnight winning streak on the inter-bank market, rising by another 40 paisa and trading at Rs66.90 and Rs67.00. The rupee weeklong firmness persisted on June 13 on improved dollar inflows. It further gained 15 paisa on the buying counter and another 20 paisa on the selling counter changing hands against the dollar at Rs66.75 and Rs66.80. During the entire week, the rupee in the inter bank market managed to recover 75 paisa against the dollar.

In the open market, the rupee traded unchanged at its week-end level against dollar changing hands at Rs68.20 and Rs68.40 on the first two consecutive trading days of the week in review. On the third trading day, however, the rupee lost five paisa on the buying counter but it remained unchanged on the selling counter finally closing the day at Rs68.25 and Rs68.40 against the dollar. The rupee firmness over the dollar extended further in the open market on the fourth trading day, when it managed to post sharp gains to the tune of 35 paisa on the buying counter and just 10 paisa on the selling counter to trade at Rs67.90 and Rs68.30.

The rupee continued its advancement over the dollar on the fourth trading day posting fresh gains of 25 paisa on the buying counter and another 35 paisa on the selling counter, changing hands at Rs67.65 and Rs67.95. This week, the rupee in the open market managed to recover 55 paisa on the buying counter and another 45 paisa on the selling counter holding firm ground against the American currency.

Versus European single common currency, the rupee shed five paisa on the opening day of the week and traded at Rs106.85 and Rs106.95 on June 9, after closing last week at Rs 106.80 and Rs 106.90 on June 7. The rupee, however, managed to stage a strong recovery from overnight losses on the following day, gaining 70 paisa in relation to euro and traded at Rs106.10 and Rs106.20 on June 10. On June 11, the rupee extended further gains over euro, gaining 25 paisa more to trade at Rs105.85 and Rs105.95.

On June 12, the rupee remained firm against the euro as it further recovered 50 paisa and traded at Rs105.35 and Rs105.45. The rupee continued its ride over the euro on June 13 gaining 50 paisa on the fifth trading day changing hands at Rs104.85 and Rs104.95. The rupee thus managed to hold firm grounds versus the European single common currency this week, recovering Rs1.45 on cumulative basis.

In the international financial markets, the dollar jumped on the opening day of the week as top Treasury and Federal Reserve officials voiced concern about its recent slide, raising the chances that officials could step into the foreign exchange market to support the US currency. The dollar was up 1.3 percent at 106.28 yen, while the euro fell one per cent to $1.5626, off a session high of $1.5845 in New York late trading on June 9. The euro rose 0.3 per cent to 166.08 yen after earlier hitting 167.15, its highest since November.

The dollar also got a boost from Lehman Brothers Holdings Inc’s plans to raise $6 billion in fresh capital on the view that it could help stabilise the US financial sector. The Wall Street bank announced its plan after posting a $2.77 billion second-quarter loss. The pound briefly hit the 10-day high at $1.9800 before trimming the gains to stand at $1.9741.

On June 10, the dollar soared against the euro and hit a 3-1/2-month peak versus the yen after Federal Reserve Chairman continued his tough talk on inflation, boosting expectations of higher interest rates. The euro has lost a touch more than 2 percent against the dollar over the last two sessions, leaving it en route to its worst two-day performance since June 2005. It last traded at $1.5450, down 1.2 per cent on June 10. The dollar also rose one perc ent to 107.44 yen, a 3-1/2-month high, and strengthened by 1.5 per cent to 1.0427 Swiss francs.

Meanwhile, the Bank of Canada surprised markets by holding interest rates steady at three per cent, signalling an end to its rate-cutting cycle because of strong price pressures. The dollar last traded at C$1.0227, little changed from a day earlier. Sterling fell as British data did little to change the view that inflation is rising and growth is slowing, and on expectations of euro zone and US rate hikes. It was down more than one per cent at $1.9539.

On June 11, the dollar slid after its best two-day gain against the euro since 2005, as investors debated the outlook for interest rates in the United States and Europe given statements from central bank officials in recent days. The euro did touch a session low against the US dollar after ECB board member Juergen Stark was reported saying the central bank is not considering a series of rate rises. The euro then recovered as buyers debated Stark’s comments compared to tough anti-inflation statements made by other ECB officials in recent days. The euro rose 0.6 per cent against the dollar to $1.5553. The dollar fell 0.9 per cent versus the Swiss franc to 1.0319 francs.

The dollar had risen to three-month highs against the yen to 107.75 earlier in the session, but retreated to 106.91, down half a percent on the day. The dollar gave back gains as investors debated whether the 2.4 per cent gain in the dollar against the yen in the previous two sessions was too far, too fast. Sterling gained versus a broadly softer dollar. The dollar was pressured across the board by a recovery in oil prices, losses on Wall Street and expectations that even if the Federal Reserve does raise rates later this year. It was up half a percent at $1.9650, with traders saying the move was accentuated by the break through resistance around $1.9620-30 level, which triggered stop losses.

On June 12, the dollar rallied broadly after data showed a surprisingly strong gain in US retail sales last month, boosting expectations that the Federal Reserve may raise interest rates this year. In New York, the euro was down 0.8 per cent at $1.5421, on track for its biggest weekly loss in percentage terms since early June 2005. The dollar added 1 percent against the Japanese currency to 107.90 yen, near a session peak of 108.08, the highest since late February. Sterling was trading down 0.9 percent at $1.9456, having fallen as low as $1.9438, its lowest since mid-May.

At the close of the week on June 13, the dollar fell 0.2 per cent against the yen to 107.73 yen in Tokyo, stepping back from a nearly four-month high of 108.08 yen hit the previous day. For the week, the dollar is up three per cent against the yen, poised for its best weekly gain in four years. The dollar rose against the euro and was on track for its best week in over three years against a basket of currencies as investors focused on a weekend meeting of G8 finance ministers. The euro was down 0.3 per cent at $1.5394. Sterling traded 0.2 pe rcent lower at $1.9425, after sliding to $1.9414, its weakest since May 15.