Khi violence blows more holes in rupee

KARACHI: The rupee fell to a record low on Friday on negative sentiment surrounding the country's economic outlook, while stocks ended at a nine-month low following the deteriorating security situation in the country's commercial hub Karachi.

The rupee closed at 86.85/90 to the dollar -- its weakest ever closing -- down from the previous record low of 86.80/85 on Thursday.

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 was traded as high as 86.92 against the dollar," said a dealer at a foreign bank.

Dealers also said there were fears of portfolio inflows, which was driving down the sentiment.

"The entire outlook is not very certain economically, and now the Karachi security situation is also weighing on the rupee as it is the country's financial hub," the dealer said.

Karachi police chief Saud Mirza told Reuters 31 people were killed on Thursday, while at least four more died on Friday. Seventeen people died in the violence on Wednesday.

The city's deteriorating security situation pushed stocks down by more than 2.23 percent to end at their lowest close since November 12, 2010.
"Concerns over violence and security concerns in the city, and limited institutional support played a catalyst role in negative sentiment," said an expert.

In the money market, overnight rates were flat at 13.40 percent, unchanged from the previous day's close, amid tight liquidity in the interbank market. (Reuters)