Business | Economy
Pakistani currency recovers slightly
The Pakistani rupee ended firmer yesterday thanks partly to a supportive statement from the central bank, but it remained close to a record low in thin trading.
- Reuters
- Published: 00:41 May 14, 2008
Karachi: The Pakistani rupee ended firmer yesterday thanks partly to a supportive statement from the central bank, but it remained close to a record low in thin trading.
The rupee ended at 67.80/68.50 to the dollar, up slightly from Monday's close of 68.00/69.00. Still, the currency has depreciated 10 per cent since the start of the year.
Trade has been thin since the rupee hit a record intraday low of 69.47/67 and a record closing low of 69.40/60 on Friday.
Traders said they had adopted a wait-and-see approach to dealing after data late on Monday showing consumer inflation at its highest level in more than 30 years reinforced expectations for a rise in official interest rates soon.
Pakistan's political crisis also took a turn for the worse late on Monday with a split in the six-week-old ruling coalition. Even before the political crisis blew up, the rupee was under pressure from a mounting oil import bill, rising prices and a burgeoning fiscal deficit.
"Clearly there are growing imbalances that they need to do something about. Another reason to stay away... or go short," said Magnus Prim, Chief Asia currency strategist at SEB in Singapore.
Central bank Governor Shamshad Akhtar said on Monday the authority was committed to exchange rate stability, would ensure liquidity through "calibrated intervention", and had stepped up vigilance in the interbank market.
Annual consumer inflation shot up in April to more than 17 per cent and wholesale inflation jumped to 23.5 per cent, figures released on Monday showed.
The data backed expectations the central bank will have to raise its key interest rate before its next scheduled meeting in July.
Import bills
Like other countries globally, Pakistan has seen its oil and food import bills soar as commodities have boomed. Apart from fuelling inflation, it has also swelled the country's trade deficit and government spending on subsidies.
Inflation is at its highest since 1975 when annual average prices rose 26.7 per cent. Analysts said monthly data only started being released in 1991 and therefore it was difficult to make an exact comparison of inflation figures.
Analysts called for aggressive action by the central bank. "The rupee's sharp plunge in recent weeks creates an immediate need for authorities to stabilise market sentiment," Mirza Baig, strategist at Deutsche Bank, said in a note on Monday.
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