Rupee hits record low against dollar

Increased import payments and negative regional sentiment on currencies top reasons.

KARACHI:

The rupee hit a record low in interbank exchange rates on Monday on increased import payments and negative regional sentiment on currencies.

The rupee closed at 88.02/07 to the dollar, compared with Friday’s close of 87.75/80.

The currency hit its previous low in September at 87.92. In the open market, the local unit ended at 88.40 to the dollar, which was much higher than its record low in September, when the currency had crossed 90 against the greenback.

“There were some import payments but there is generally cautious to weak sentiment about currencies of the region and a bleak outlook for Pakistan’s economy,” said a dealer at a foreign bank.

According to a poll conducted by Reuters last week, investors have grown more bearish on most emerging Asian currencies in the last two weeks, as Europe’s debt crisis deepens.

Dealers said there was also some pessimism regarding the country’s economy. Pakistan’s foreign exchange reserves fell to $16.96 billion in the week ended November 18, after hitting a record $18.31 billion in the week ended July 30.

Dealers said the rupee was under pressure despite rising remittances from overseas Pakistanis. Furthermore, dealers also cautioned that a widening current account deficit means the currency could experience further downward pressure in the days ahead.

The International Monetary Fund (IMF) also assessed that the outlook for Pakistan’s economy for the current year ending June 2012 was “challenging”, dealers said. In a statement last week, the IMF said that ongoing security concerns were likely to limit capital inflows.

In the money market, overnight rates ended at its top level of 11.90%, amid tight liquidity in the interbank market.

Published in The Express Tribune, November 29^th, 2011.