Rupee falls to record low against dollar, closes at 87.10

KARACHI: Import payments and gloomy sentiment about country’s economic outlook forced the rupee to a fresh record low on Monday for the fourth consecutive trading session, dealers said.

The rupee closed at 87.00/07 to the dollar, down from the previous record low of 86.95/99 on Saturday.

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 87.10 against the dollar," said a dealer at a local bank.

"There were some payments of about $40 to $60 million today."

Stalled payments from a bailout programme by the International Monetary Fund (IMF) are 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 the official data, remittances rose 38.57 percent 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 outflows, which was driving down the sentiment.

Foreign investors sold shares worth $5.63 million last week.

Dealers said the security situation of Karachi was also weighing down the rupee, with at least 80 people killed since Wednesday, according to police officials.

The commercial hub of Pakistan has been gripped by an escalation of political and ethnic violence as well as gang wars in recent months.

Copyright Reuters, 2011