High remittances shielding the rupee

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The rupee recovered on Thursday from a record low from the previous day because of lack of import payments, but dealers expect the local currency to remain under pressure. The rupee ended at 86.48/53 to the dollar, firmer than Wednesday’s close of 86.56/58. The rupee hit a record low of 86.58 on Wednesday. “The rupee was traded as high as 86.57 today,” said a dealer at a local bank.
Dealers said dollar payments are typically higher in July and August because of stronger oil demand and debt payments. As well as oil payments, the International Monetary Fund’s stalled aid programme to Pakistan is also weighing down the rupee. Foreign direct investment has also been falling, dropping 26.8 per cent in the 2010/11 fiscal year to $1.573 billion from $2.150 billion in the same period last year. But current account surplus gives the country some sense of financial security though analysts said it might not last for much longer.
For the 2010/11 fiscal year the government posted a provisional current account surplus of $542 million, the first full-year surplus after seven years of deficits. However, dealers said increased remittances from Pakistanis working abroad supported the rupee and shielding the currency from a sharp fall. According to official data, remittances rose to a record $11.2 billion in the 2010/11 fiscal year, an increase of 25.77 percent from the previous year.