Rupee falls; o/n rates down

KARACHI: The rupee inched closer to its record low on Tuesday on increased payments for imports, and dealers expect the pressure to continue because of a widening current account deficit.

The rupee ended at 89.95/90.00 to the dollar, weaker than Monday's close of 89.39/44. The rupee hit a record low of 90.03 last week.

"The sentiment is quite negative and the rupee is likely to depreciate further," said a bank dealer.
The country's current account deficit stood at $2.104 billion in July-Nov compared with $589 million in the same period a year earlier.

The deficit is likely to widen further in coming months because of debt repayments and a lack of external aid.

Islamabad has to begin repayments on an $8 billion IMF loan in early 2012, and without additional sources of revenue, its foreign exchange reserves may come under pressure, analysts said.

It has to make a repayment of more than $1.1 billion in the second half of 2011/12 fiscal year.

Foreign exchange reserves were at $16.66 billion in the week ending Dec. 16, compared with a record $18.31 billion as of July 30.

Dealers said the signing of a bilateral currency swap agreement between Pakistan and China on Friday slightly improved sentiment.

The agreement would promote trade between the two countries and also further strengthening their economic ties, State Bank of Pakistan said in a statement.

The bilateral currency swap agreement is 10 billion Chinese yuan ($1.58 billion) for 140 billion rupees ($1.57 billion) and would end in three years.

In the money market, overnight rates fell to 9.10 percent, compared with the previous day's close of 11.90 percent after the central bank conducted a 10-day reverse repo and bought back government paper worth 49 billion rupees ($549.02 million). (Reuters)