Wednesday December 03, 2008 Mashriq Group of Newspapers         Editor-in-Chief Syed Ayaz Badshah
 
 

Rupee firms despite tension with India

KARACHI: The rupee firmed slightly on Tuesday despite tension with India and violence in the commercial hub of Karachi and dealers said they expected it to remain firm in the short-term.

Dealers said $3.1 billion from the International Monetary Fund (IMF) that arrived last week, the first tranche of a $7.6 billion loan for Pakistan, helped strengthen the rupee.

The rupee was quoted closing at 78.60/70 to the dollar compared with Monday's closing of 78.66/76. Dealers said they expected it to strengthen to 78 to the dollar.

"There were some inflows and a few outflows but the rupee should firm in coming days," dealers said.

The rupee firmed despite the confirmation that the United States had entered a recession in December 2007, dealers said.

World stocks fell on Tuesday, erasing more than half of last week's gains, while oil hit a 3-½ year low and the yen and government bonds surged as concern intensified about a deep global recession.

But in Pakistan, IMF approval of a loan to avert a balance of payments crisis and prevent the government defaulting on its international debt obligations had helped market sentiment, dealers said.

Pakistan's foreign currency reserves stood at $9.4 billion on Nov. 26, reflecting the arrival of the $3.1 billion from the IMF. Reserves had totalled $6.6 billion as of Nov. 22.

Pakistan got immediate access to the $3.1 billion under the 23-month facility with the rest to be phased in subject to quarterly review.

Governor State Bank of Pakistan Shamshad Akhtar reiterated a tight monetary stance on Monday.

Referring to a recent 200 basis point increase in the key discount rate to 15 percent, she said under the "current situation further monetary tightening was necessary".

While the rupee firmed on Monday and again on Tuesday despite unrest in Karachi between ethnic-based factions and the tension with India over last week's assault on Mumbai, dealers it could face pressure if tension with India worsened.

The Karachi Stock Exchange (KSE) benchmark 100-share index has been shielded from pressure since a floor was put on the main index in August after a fall of nearly 35 percent for the year, and it ended flat at 9,187.10 points.

The exchange's board of directors met last week to discuss the removal of the floor but they did not reach a decision and have given no date for its removal.

Dealers say it is doubtful the floor would not be removed any time before next week's Eidul Adha Muslim holiday. - Reuters

 

 
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