The Pakistani rupee fell to a record low of 86.50 against the U.S. dollar, but ended firmer on possible verbal central bank intervention, on Monday on increased import payments and concerns that growing tensions with the West could choke off much needed foreign aid. The Karachi Stock Exchange’s benchmark 100-share index ended 0.48 percent, or 57.26 points, higher at 12,030.64. Turnover fell to 40.28 million shares, compared with 44.37 million shares traded on Friday.
Stocks ended higher, despite the attack on the naval aviation base in the country’s commercial hub Karachi, as bargain hunters bought middle tier shares. But turnover remained low as most investors remained cautious. During the trading session, 116 scrips showed a positive change, 105 declined and 112 were unchanged out of a total of 333 scrips traded. In the money market, overnight rates ended between 13.25 percent and 13.50 percent, compared with Saturday’s close of 13.75 percent but dealers expect rates to remain near the top level of 13.90 percent.
“The rupee traded at 86.50 and in the end closed at 85.85 but sentiment is still weak because of the country’s bleak outlook,” said a bank dealer. Some dealers said the central bank may have verbally intervened in the currency market to support the rupee. The rupee ended at 85.85 to the dollar, compared with Saturday’s close of 86.38/40. A major attack by militants on a naval aviation base in Karachi further weakened sentiment on the local currency, adding to the country’s reputation for instability, traders said.
Concerns over a reduction in foreign aid have flared since the US raid killed al Qaeda leader Osama bin Laden early this month in a house near the Pakistani capital and the rupee has lost 1.54 percent since then, almost the same as its total loss of 1.53 percent in 2010. The rupee’s slump to a record low comes a little over a month after it rose to an eleven-month high suggesting outlook has weakened because of uncertainty following bin Laden’s death.