Rupee ends firmer on SBP measures, 71.20 vs dollar

[Naveed Yaseen]

Friday, July 11, 2008
KARACHI: The Pakistani rupee ended firmer on Thursday, steadied by central bank measures to tighten regulations on transactions, after the currency set a record closing low this week.

The rupee was quoted at 71.15/25 to the dollar at the close compared with Wednesday’s close of 71.40/60.

On Tuesday, it closed at its weakest ever closing level of 72.85/90.

The State Bank of Pakistan (SBP) issued measures late on Tuesday and said Governor Shamshad Akhtar had “indicated that the SBP is continuing to support the rupee to ensure exchange rate stability.”

The main measure was a temporary suspension of forward booking of foreign currency for all imports, removing the simplest way for importers to hedge against a weakening rupee.

“In the short-term, the rupee should be stable,” said a currency dealer. “However, fundamentals are still weak and if that does not change, the outlook is bleak.”

There was market speculation that the central bank would raise interest rates in a policy review later this month to try to bring rising prices under control, dealers said.

The key discount rate was raised to 12 per cent from 10.5 per cent in May to stabilise the currency and dampen speculation.

A new coalition government, sworn in more than three months ago, has sought help from multi-lateral lenders and friendly governments to stave off the economic threats as the country tries to cope with soaring import costs.

An Asian Development Bank credit of $810m is expected to be approved in August and disbursed in Sept, an official with knowledge of the transaction said this week. Foreign currency reserves have dwindled to levels equivalent to less than three months worth of imports as the central bank sold dollars to help oil importers make payments.

http://www.thenews.com.pk/daily_detail.asp?id=123373