KARACHI :The rupee was 2 percent weaker at a record low of 72.42/47 to the dollar in early trade on Tuesday because of worry about inflation, widening current and budget account deficits and security, dealers said.
The rupee had closed at 71.00/05 to the dollar on Monday.
The currency had already been under pressure because of a rise in demand for dollars from importers for payments, particularly oil payments, and there has been a steady dip in foreign currency.
“The whole macroeconomic picture is very bleak with inflation at a three-decade high, widening twin deficits and depleting reserves,” said a currency dealer.
Dealers said recent bombings including a weekend suicide attack in the capital and seven small blasts in Karachi on Monday had no direct impact on trade but compounded the worries.
Dealers said the rupee had traded at 72.66 on Tuesday.
It is now beyond levels last seen in late May, when a precipitous fall prompted the central bank to take steps, including raising the key discount rate to 12 percent from 10 percent, to stabilise the currency and dampen speculation.
The rupee has fallen 17.6 percent against the dollar this year as annual inflation has accelerated to a three-decade high and fiscal and current account deficits have widened.
Traders said intervention by the State Bank of Pakistan, which closely shepherds the exchange rate, would stabilise the rupee in the short-run but the State Bank’s reserves were running low because of the weight of demand for dollars from importers.
According to official figures, $1.42 billion of foreign reserves was used to cover the oil import bill in May. The monthly average between February and May was $1.27 billion.
With rising oil prices, the oil import bill is expected to increase and with foreign reserves of $11.3 billion, analysts said the outlook was bleak.
Foreign exchange reserves have fallen to $11.3 billion, in spite of fresh inflows, from a record high of more than $16 billion in October.
Traders said the State Bank would probably have to raise interest rates in a policy review later this month to try to bring rising prices under control.
Analysts fear political infighting is distracting government attention from restoring economic stability, though a budget announced last month set targets to bring down an unsustainable fiscal deficit, and the government is seeking loans from friendly governments and multilateral lenders.
Bussiness News.
Rupee Weakens 2pc To 72.42/47 Against Dollar
KARACHI :The rupee was 2 percent weaker at a record low of 72.42/47 to the dollar in early trade on Tuesday because of worry about inflation, widening current and budget account deficits and security, dealers said.
The rupee had closed at 71.00/05 to the dollar on Monday.
The currency had already been under pressure because of a rise in demand for dollars from importers for payments, particularly oil payments, and there has been a steady dip in foreign currency.
“The whole macroeconomic picture is very bleak with inflation at a three-decade high, widening twin deficits and depleting reserves,” said a currency dealer.
Dealers said recent bombings including a weekend suicide attack in the capital and seven small blasts in Karachi on Monday had no direct impact on trade but compounded the worries.
Dealers said the rupee had traded at 72.66 on Tuesday.
It is now beyond levels last seen in late May, when a precipitous fall prompted the central bank to take steps, including raising the key discount rate to 12 percent from 10 percent, to stabilise the currency and dampen speculation.
The rupee has fallen 17.6 percent against the dollar this year as annual inflation has accelerated to a three-decade high and fiscal and current account deficits have widened.
Traders said intervention by the State Bank of Pakistan, which closely shepherds the exchange rate, would stabilise the rupee in the short-run but the State Bank’s reserves were running low because of the weight of demand for dollars from importers.
According to official figures, $1.42 billion of foreign reserves was used to cover the oil import bill in May. The monthly average between February and May was $1.27 billion.
With rising oil prices, the oil import bill is expected to increase and with foreign reserves of $11.3 billion, analysts said the outlook was bleak.
Foreign exchange reserves have fallen to $11.3 billion, in spite of fresh inflows, from a record high of more than $16 billion in October.
Traders said the State Bank would probably have to raise interest rates in a policy review later this month to try to bring rising prices under control.
Analysts fear political infighting is distracting government attention from restoring economic stability, though a budget announced last month set targets to bring down an unsustainable fiscal deficit, and the government is seeking loans from friendly governments and multilateral lenders.
KARACHI :The rupee was 2 percent weaker at a record low of 72.42/47 to the dollar in early trade on Tuesday because of worry about inflation, widening current and budget account deficits and security, dealers said.
The rupee had closed at 71.00/05 to the dollar on Monday.
The currency had already been under pressure because of a rise in demand for dollars from importers for payments, particularly oil payments, and there has been a steady dip in foreign currency.
“The whole macroeconomic picture is very bleak with inflation at a three-decade high, widening twin deficits and depleting reserves,” said a currency dealer.
Dealers said recent bombings including a weekend suicide attack in the capital and seven small blasts in Karachi on Monday had no direct impact on trade but compounded the worries.
Dealers said the rupee had traded at 72.66 on Tuesday.
It is now beyond levels last seen in late May, when a precipitous fall prompted the central bank to take steps, including raising the key discount rate to 12 percent from 10 percent, to stabilise the currency and dampen speculation.
The rupee has fallen 17.6 percent against the dollar this year as annual inflation has accelerated to a three-decade high and fiscal and current account deficits have widened.
Traders said intervention by the State Bank of Pakistan, which closely shepherds the exchange rate, would stabilise the rupee in the short-run but the State Bank’s reserves were running low because of the weight of demand for dollars from importers.
According to official figures, $1.42 billion of foreign reserves was used to cover the oil import bill in May. The monthly average between February and May was $1.27 billion.
With rising oil prices, the oil import bill is expected to increase and with foreign reserves of $11.3 billion, analysts said the outlook was bleak.
Foreign exchange reserves have fallen to $11.3 billion, in spite of fresh inflows, from a record high of more than $16 billion in October.
Traders said the State Bank would probably have to raise interest rates in a policy review later this month to try to bring rising prices under control.
Analysts fear political infighting is distracting government attention from restoring economic stability, though a budget announced last month set targets to bring down an unsustainable fiscal deficit, and the government is seeking loans from friendly governments and multilateral lenders.
