Rupee At Record Low For Third Straight Day

Wednesday, August 13, 2008 at 1:36 pm

KARACHI :The rupee weakened to a record low against the dollar on Wednesday, the third consecutive day it has hit an all-time low, and investors said more weakness is seen given country’s political and economic turmoil.

Two traders said the rupee traded at record low levels of 74.10 and 74.30 against the US dollar on Wednesday. By 0126 GMT, the currency was trading at 74.25/35, Reuters data showed, and at 74.90 and 75 in the kerb market.

Dwindling foreign reserves, soaring inflation, widening trade and fiscal deficits, and the ruling coalition government’s plan to impeach President Pervez Musharraf have hammered Pakistan’s financial markets this year and drained investor confidence.

“I’m shorting the rupee right now. I see more weakness ahead,” said one trader of the traders, who declined to be identified.

The rupee closed at a record low of around 73.70/80 against the US dollar on Tuesday. It has lost more than a fifth of its value against the dollar this year.

The Karachi Stock Exchange (KSE) benchmark 100-share index is hovering near two-year lows. It was down 2.2 percent on Wednesday.

Analysts said while the State Bank of Pakistan (SBP) is closely monitoring the slide, the cash-poor bank will find it hard to buy and defend the currency because its foreign exchange reserves are worth less than three months of imports.

Analysts said the key step for the government was to secure foreign financial aid.

Saudi Arabia is in talks to defer payments for crude oil sales this fiscal year, while two US senators unveiled a $7.5 billion, five-year aid bill for Pakistan in July.

Further interest rate rises will not be helpful for the ailing economy either given that rates, at 13 percent, are at their highest since June 2001, analysts said.

The State Bank last raised rates in July by 1 percent to tackle inflation and the twin deficits.