Pakistani rupee makes record low at 87

The Pakistani rupee fell to a fresh record low on Saturday on negative sentiment about the country’s economic outlook, as well as the deteriorating security situation in Pakistan’s financial hub Karachi. The rupee closed at 86.95/99 to the dollar – its weakest ever closing — down from the previous record low of 86.85/90 on Friday. Dealers said they expect the currency to remain under pressure, as dollar payments are typically higher in July and August because of stronger oil demand and debt payments. “The rupee was traded as high as 87 against the dollar,” said a dealer at a local bank. “There were no payments today but there are some due on Monday so there was some position building plus the sentiment is still very weak.” Stalled payments from a bailout programme by the International Monetary Fund (IMF) is also negatively impacting the rupee. The IMF has criticized the Pakistan government for its patchy implementation of fiscal reforms, and has held back the sixth tranche of an $11 billion bailout 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 shielded the currency from a sharp fall in recent weeks, but increased dollar demand over the last week has 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. Dealers also said there were fears of portfolio inflows, which was driving down the sentiment. Dealers said the security situation of Karachi was also weighing down the rupee as at least 65 people have died in the violence which erupted on Wednesday, according to police officials. The commercial hub of Pakistan has been gripped by political and ethnic violence as well as gang wars in recent months. According to the independent Human Rights Commission of Pakistan, 800 people have been killed by the end of July in ethnic and politically linked violence alone.