KARACHI, Oct 29: The rupee lost 11 paisa to a US dollar in the inter-bank market on Friday and closed at 61.33, down from 61.22 on Thursday. Senior bankers said the local currency fell due to increased dollar demand for payment of oil import bills.
They said forward buying of dollars by importers also weakened the rupee.
On Thursday, the rupee had lost 12 paisa to a US dollar. Since the start of the new fiscal year in July, the local unit has so far lost 5.5 per cent value against the dollar, coming down to 61.33 on October 29 from 58.13 at the end of June, chiefly due to a widening trade deficit as international oil prices touched 20-year highs.
Trade deficit increased to $839 million in July-September 2004 from $144 million in a year-ago period. Now, as international oil prices have started receding and foreign exchange inflows are likely to rise with the launching of $500 million Islamic bonds and through inflow of funds from the World Bank and the Asian Development Bank, the rupee may not fall very sharply in the months to come.
But this does not mean it would recover. In the best case scenario the rupee may weaken slightly in the remaining part of this fiscal year. The reason is that the trade deficit would continue to widen further due to increased imports of machinery, oil and fertilizers, etc., to meet the needs of the growing economy.
