26 October 2004	Tuesday	11 Ramazan 1425

KARACHI, Oct 25: The rupee on Monday shed 61 paisa or one per cent value against the US dollar in the inter-bank market, sinking below a three-year low of 61 a dollar.

Bankers said the rupee closed at 61.16 a dollar, down 61 paisa from Saturday close of 60.55, on higher demand for dollars by some leading foreign banks for their customers.

Treasurers of local and foreign banks said there was no direct intervention from the State Bank to support the rupee. But they were not sure whether the central bank sold dollars through some banks.

Bankers said the rupee sank below 61 a dollar primarily due to heavy forward dollar buying by importers and also because of payment of import bills, but they did not mention any specific import payment.

The rupee has lost 5.2 per cent value since the start of the fiscal year in July, as foreign exchange inflows have remained shorter than the outflows due to widening trade deficit. The rupee lost 1.9 per cent value in July-September when trade deficit soared to $839 million from $144 million in a year-ago period. It has lost another 3.3 per cent value so far during this month for a host of reasons, including growing trade deficit.

Delayed selling of export proceeds by exporters and panic-driven heavy forward buying by importers, both in anticipation that the rupee would fall further, have also weakened the local currency.

The SBP has intervened at times to check volatility in exchange rates but it has not made any serious attempt to defend the rupee at a certain level. One of the reasons for allowing the rupee to continue to fall in response to the market forces has been to benefit exporters. Besides, with the ever increasing demand for dollars on the back of soaring international prices and increased imports of machinery and other non-oil imports, the SBP finds it difficult to lift the rupee through repeated interventions as that may hit its foreign exchange reserves.