Rupee firms; KSE up; o/n rates flat

KARACHI: The rupee firmed further on Friday buoyed by a lack of import payments after a days of record lows, but dealers said the local unit is likely to come under pressure in the medium term because of a bleak outlook of the country's economy.

The rupee ended at 89.00/10 to the dollar, compared with Thursday's close of 89.10/16. It made a record low of 89.45 on Wednesday.

"Next week we might see (a) slight recovery in the rupee because there are no significant payments, but the recovery is likely to be short-lived," said a currency dealer at a local bank.

Dealers said there were few import payments -- for which dollars are required -- due in the next few days.

But country’s bleak economic outlook could further punish the rupee in the medium-term.

The International Monetary Fund forecasts economic growth for 2011/12 fiscal year at 3.5 percent, lower than the government's target of 4.2 percent.

Country’s current account deficit stood at $1.6 billion in July-Oct compared with $541 million in the same period a year earlier.

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

Foreign exchange reserves fell to $16.68 billion in the week ending Dec.2. They hit a record $18.31 billion in the week ended July 30.

Dealers said tense relations between Pakistan and the United States were also worrisome. Two senior Republican senators called on Monday for a thorough review of U.S. relations with Pakistan, declaring that all security and economic aid to Islamabad must be reconsidered.
Stocks rose, led by Fauji Fertiliser and heavyweight Oil and Gas Development Co Ltd (OGDCL).

The Karachi Stock Exchange's (KSE) benchmark 100-share index ended 0.63 percent, or 72.04 points, higher at 11,464.61 on turnover of 43 million shares.

Fauji Fertiliser ended 2.12 percent higher at 158.75 rupees, while OGDCL rose 2.24 percent at 158 rupees.

In the money market, overnight rates closed at the top level of 11.90 percent, unchanged from Thursday's close, amid tight liquidity in the interbank market, dealers said. (Reuters)