Pakistani rupee ends at record low

The Pakistani rupee on Thursday fell to a record low because of negative sentiment surrounding the country’s economic outlook, and strong dollar demand for oil import payments amid soft inflows. Dealers said they expect the local unit to stay under pressure for now, as dollar payments are typically higher in July and August because of stronger oil demand and debt payments
The rupee closed at 86.80/85 to the dollar — its weakest ever closing — down from 86.64/70 on Wednesday. The previous weakest close by the rupee was 86.75/80 on August 1. “The rupee hit a record low of 86.85 today, and the main reason for the rupee being under pressure is because it’s sentiment driven,” said a dealer at a foreign bank. Stalled payments from a bailout programme by the International Monetary Fund (IMF) is also negatively impacting the rupee. The IMF has criticised the Pakistan government for its patchy implementation of fiscal reforms, and has held back the sixth tranche of an $11 billion loan programme since August last year. IMF and Pakistan officials were due to meet last month, but the meeting has been delayed and no new date has been announced.
Dealers said increased remittances from Pakistanis working abroad had supported the rupee and shielding the currency from a sharp fall in recent weeks, but the increased dollar demand over the last week pushed the rupee lower. According to official data, remittances rose 38.57 per cent to $1.1 billion in the first month of 2011/12 fiscal year, compared with $791.18 million in the same period last year. In the currency market, stocks fell more than 1.2 per cent because of the deteriorating security situation in the country’s financial hub. At least 30 people have been killed in a fresh outbreak of violence in Karachi, but police on Thursday said the clashes now focused more on gang turf wars after months of ethnic and political disputes. “The deteriorating law and order situation of the city coupled with lower than expected earnings by National Bank of Pakistan caused index to fell by more than 1 per cent,” said Samar Iqbal, a dealer at Topline Securities Ltd. National Bank of Pakistan (NBP) reported on Thursday a net profit of 8.13 billion rupees ($93.80 million) for the first half of 2011, compared with a net profit of 3.86 billion rupees ($44.4 million)in the same period last year.
The result was lower than analyst expectations and NBP ended 4.98 per cent lower at 43.47 rupees. The Karachi Stock Exchange’s benchmark 100-share index closed 1.25 per cent, or 141.43 points, lower at 11,128.52. Volume fell to 41.62 million shares from 46.33 million shares traded on Wednesday. In the money market, overnight rates rose to 13.40 per cent, compared with the previous day’s close of between 10.75 per cent and 11.0 per cent amid tight liquidity in the interbank market.