Pakistani rupee at record low; stocks fall

The Pakistani rupee fell to a record low on Friday on negative sentiment surrounding the country's economic outlook.

Global woes came home to roost in Pakistan,which was again rocked today by more local pain in the form of a huge explosion.

The Pakistani rupee fell to a record low on Friday on negative sentiment surrounding the country’s economic outlook,while stocks ended at a nine-month low following the deteriorating security situation in the country’s commercial hub Karachi.

The rupee closed at 86.85/90 to the dollar — its weakest ever closing — down from the previous record low of 86.80/85 on Thursday.

Story continues below this ad

Dealers said they expect the local unit to stay under pressure for now,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 86.92 against the dollar,said a dealer at a foreign bank.

Stalled payments from a bailout programme by the International Monetary Fund (IMF) is also negatively impacting the rupee.

The IMF has criticised 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.

Story continues below this ad

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 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 inflows,which was driving down the sentiment.

Story continues below this ad

The entire outlook is not very certain economically,and now the Karachi security situation is also weighing on the rupee as it is the country’s financial hub,the dealer said.

Karachi police chief Saud Mirza told Reuters 31 people were killed on Thursday,while at least four more died on Friday. Seventeen people died in the violence on Wednesday.

The city’s deteriorating security situation pushed stocks down by more than 2.23 percent to end at their lowest close since November 12,2010.

Concerns over violence and security concerns in the city,and limited institutional support played a catalyst role in negative sentiment,said Ahsan Mehanti,director at Arif Habib Ltd.

Story continues below this ad

The Karachi Stock Exchange’s benchmark 100-share index closed 2.23 percent,or 248.70 points,lower at 10,879.82.

Volume was at 41.01 million shares,compared with 41.62 million shares traded on Thursday.

Dealers said the market was also jittery as world stocks extended steep losses from Thursday.

In the money market,overnight rates were flat at 13.40 percent,unchanged from the previous day’s close,amid tight liquidity in the interbank market.