KARACHI, July 20: The rupee extended losses on Tuesday because of increased dollar demand to cover import-related payments, dealers said. The dollar ended at Rs58.27, up from Rs58.25 on Monday.

"Dollar-demand has risen and supply remains slow, which is adding extra pressure on the inter-bank market," said a dealer at a foreign bank.

"Oil-import payments are also rising, and every week you see more payments coming into the system." Rising global oil prices and an end to Saudi Arabia's concessional oil-export policy for Pakistan has increased demand for payments, dealers said.

The money market had a Rs70 billion surplus due to an inflow of Rs51 billion worth of funds from maturing short-term treasury bills and some corporate inflows. The overnight rate was flat at 0.25pc.

The central bank plans to sell Rs70 billion of six-month treasury bills in an auction on Wednesday, in line with market expectations, because of the expected higher inflow of funds from maturing bills. With so much liquidity in the system, dealers expect banks to bid for larger amounts between 2.40pc and 2.50pc, while some banks might bid as high as 2.90pc.