Rupee falls below 86 mark

KARACHI: The rupee fell to a fresh record low against the US dollar for the second day running in inter-bank trade on Tuesday.

The local currency fell to a rate of 86.03 against the greenback by the end of the day’s trade, bank sources revealed.

Experts explained that the supply of dollars in the banking system dried up on the back of closure of US financial markets between Friday and Monday for weekend and Labour Day holidays.

“Remittances have not been transferred to the country over the past five days,” commented a dealer at a local bank. “Banks normally deal in about $150 to $200 million worth of foreign exchange transactions every day so obviously the lack of dollar supply has impacted exchange rates in the past two days,” he added.

Despite posting declines in inter-bank trade, the local currency held firm against the greenback in the open market, trading in a range of Rs85.30 to Rs85.40.

President of Foreign Exchange Dealers Association Malik Bostan attributed the stability of the local currency to “cash brought in by overseas Pakistanis coming to the country for Eid holidays”.

“But some exchange companies had to shut down their outlets due to non-availability of foreign exchange for the second time in two days,” he added.

Experts expect the exchange rate to stabilise below the 86 mark once the US markets re-open, however the local currency is likely to remain under pressure due to persistent external account deficits and surging foreign debt.

Published in The Express Tribune, September  8^th, 2010.