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The Pakistani rupee was marginally weaker on Monday, however dealers expect the rupee to remain stable after the central bank raised interest rates sharply last week to tackle inflation.
The closing quote put the rupee at 67.90/68.20 to the dollar, compared with Saturday's close of 67.80/68.00. The wide spreads reflected banks' reluctance to trade.
The rupee has depreciated 10 per cent against the dollar since the beginning of the year, mostly in recent weeks, but has recovered 2.4 per cent from a record closing low last Tuesday. "Trading was dull but the rupee has firmed after the measures taken by the State Bank last week," said a currency dealer in Karachi.
Apart from the key discount rate, the central bank increased the cash reserve requirement (CRR) to nine per cent from eight per cent, for all deposits and time liabilities of less than a year.
The central bank governor said the monetary tightening and moves to limit central bank borrowing should help stabilise the rupee. The rupee has been under pressure, particularly in the past few weeks, because of increased demand for dollars from importers, particularly for oil payments as a result of rising international prices. Dealers said they were also expecting rupee to stabilise as foreign inflows were expected in the coming weeks.
- Reuters
Karachi (Reuters) Pakistani shares fell more than three per cent yesterday as political worries weighed on a market already affected by a central bank increase of its key discount rate to 12 per cent from 10.5 per cent last week.
The Karachi Stock Exchange (KSE) benchmark 100-share index ended 3.28 per cent, or 426.96 points, lower at 12,584.78, its lowest closing since last September 11. Volume was 99.6 million shares and losers beat gainers 247 to 77.
The KSE-index has shed 10.6 per cent since the beginning of the year and is 20 per cent lower than a life high, set on April 21.
"There's not much interest in the market after the State Bank tightened its monetary policy last week," said Tauseef Ladak a dealer at Taurus Securities.
Dealers said some investors were offloading their holdings following an increase in the discount rate on Thursday evening.
The central bank increased in its key discount rate to 12 per cent from 10.5 per cent to tackle surging inflation and widening fiscal and current account deficits.
Dealers said the banking sector was under severe pressure as the State Bank had instructed banks to pay depositors a minimum five per cent on interest-bearing checking accounts, with effect from June 1, to encourage deposits.
The average return on all saving accounts has been 2.1 per cent but there has been no mandatory level.
Concerns
Investors were also concerned about the economic and political outlook and were likely to remain sidelined because of the rate increase, the political uncertainty and in the run-up to a new budget, expected early next month, dealers said.
Analysts are particularly concerned about tension between the leader of the ruling Pakistan People's Party, Asif Ali Zardari, and President Pervez Musharraf after Zardari proposed constitutional changes that would strip the president of power.
Among the most active companies, volume leader Oil and Gas Development Co fell 0.6 per cent to Rs125.61, Pakistan Petro-leum shed 1.6 per cent to Rs249.50 and Pakistan Telecommunications ended five per cent lower at Rs39.21.
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