Pakistani rupee weakens to record low

The Pakistani rupee weakened to a record low yesterday due to import payments, weak economic fundamentals and concern over tensions between Pakistan and the US resulting from US military action against militant targets on Pakistani territory.

It traded at a record low of 77.55 in early trade, compared with a previous low of 77.45, struck on September 3. By 12:15pm (0615 GMT) the rupee had steadied to 77.25/35 to the dollar, compared with Tuesday's closing of 76.90/77.00.

Dealers said there were suspicions that the central bank had intervened by selling dollars. The central bank has been buying dollars in the ready market with a simultaneous commitment to sell them at future dates, they said.

"The rupee has been under pressure since yesterday due to some import payments," said a currency dealer. "The outlook is still bleak due to the political developments this week and depleting reserves."

Dealers said the market was nervous due to the situation on the Pakistan-Afghanistan border, and because of the global financial crisis after Lehman Brothers filed for bankruptcy protection.

The rupee has lost 20.25 per cent against the dollar this year, due to a deterioratingbalance-of-payments position.

Souring relations between Pakistan and its largest bilateral donor were unsettling given the need to build foreign currency reserves that were down to $9.1 billion in the week that ended on September 6.