KARACHI, Oct 14: The rupee on Thursday lost 12 paisa more against the US dollar in the inter-bank market on increased dollar buying for oil payments as well as for transfer of profits abroad by multinational companies.

Senior bankers said the rupee fell to 59.69 a dollar at the close of the business on Thursday from 59.57 on Wednesday. This 12 paisa loss was the fourth in a row, the rupee has witnessed so far this week. It shed 18 paisa in three consecutive sessions from Monday through Wednesday on higher demand for dollars from the government as well as the private sector.

Higher oil prices in international market and foreign debt payments by the government and the private sector coupled with remittances of profits and dividends abroad by multinationals here have pushed up the demand for dollars in the inter-bank market. The demand for dollar has also risen due to the increase in the number of people visiting Saudi Arabia to perform Umrah during Ramazan.

The rupee has been on the decline since the start of this fiscal year in July for the reason stated above excluding the last one. The central bank has remained in the market making timely but not-too-forceful interventions for fear of a draw down on the foreign exchange reserves and in line with its policy of keeping the dollar stable to benefit the exporters.

That explains why the local currency has so far lost 2.7 per cent value against the US dollar in the inter-bank market since July 1 falling to 59.69 a dollar on October 14 from 58.13 at the end of June.

As the rupee has kept falling right from the start of this fiscal year, what else has put additional pressure on it is this. Whenever the rupee has fallen significantly the exporters have slowed the sale of export proceeds anticipating further fall in its value and the importers have jumped in to make aggressive forward buying of dollars fearing it would rise to new heights. This has also kept the rupee on the decline and at times lessened the impact of the State Bank interventions.

This phenomenon can be cited as the most immediate reason, coupled with other reasons stated above, for a fall of 30 paisa or half a per cent of the rupee value in just four days of this week.

Central bankers say the SBP is not making forceful and large interventions to support the rupee for fear of a draw down on its $10 billion plus foreign exchange reserves.

They do admit that the rupee has been on the fall chiefly due to genuinely higher dollar demand. "So even a large one-time intervention would not help much (in stabilizing the rupee)," said a senior central banker. And making sizable repeated interventions that can really lift the sagging rupee would reduce the forex reserves, he added.

Besides, the central bank wants to support the exporters through a weaker rupee amidst rising interest rates. But a real moot point is that to what extent it should allow the rupee to depreciate.

After allowing a 2.7 per cent fall in the rupee value in three and a half months, SBP now needs to take a more balanced view of the pros and cons of the rupee depreciation. If the local unit keeps falling at the same pace it would accelerate the dollarization of bank deposits with all its negative fall-outs on the economy.

Fresh foreign currency deposits of banks i.e. those mobilized after May 1998 nuclear blasts grew by $158 million in July-August 2004 as the rupee lost 63 paisa or 1.1 per cent value against the US dollar in these two months.

Latest figures are being compiled but bankers say these deposits would show further increase for September when the rupee lost another 49 paisa or 0.8 per cent value against the dollar.

OPEN MARKET: The fall of the rupee in the inter-bank market also had an immediate impact on open market exchange rates. On Thursday the rupee fell to 60 a dollar for spot buying by the exchange companies. It has lost 27 paisa against the dollar in the open market so far during this week.