KARACHI, Nov 30: The rupee, after having lost 5.5 per cent value against the dollar in July-October this year, recovered 2.7 per cent in November as the State Bank provided dollars for making oil payments during this month.

Bankers said the rupee closed at 59.70 in the inter-bank market on November 30, showing a huge recovery of 167 paisa or 2.7 per cent against the US unit during the month. At the end of October, the rupee had closed at 61.37 a dollar in the inter-bank market, down 5.5 per cent from its end-June close of 58.13.

The local currency had depreciated by a big margin in the first four months of this fiscal year, despite heavy SBP intervention to lift it, mainly due to a huge trade deficit of $1.432 billion during this period. The central bank had sold around $1.4 billion through interventions during these four months.

Whereas the recovery of 2.7 per cent in the rupee value against the dollar this month seems to have stabilized the local currency to a certain extent it is yet to be seen how long the central bank will be able to sell dollars to the banks for making oil payments.

It started doing this at the start of this month presumably on the assumption that the local currency had been under pressure due to soaring oil prices in the world markets. But analysis of the trade data of July-October 2004 reveals that higher oil prices accounted for only 12.1 per cent of the total increase of $1.605 billion in Pakistan's import bill in July-October.

The import bill rose to $5.894 billion in July-October 2004 from $4.289 billion in a year-ago period. The import bill went up not only because of higher oil prices but also because of larger import of oil, machinery, metals, fertilizers and food items etc.

The dollar selling by the SBP to prop up the rupee is reducing its foreign exchange reserves. Liquid forex reserves held by the central bank fell to about $9.468 billion on November 20 from $9.778 billion at the end of October, showing a decline of $340 million within 20 days. That corresponds well its estimated dollar selling for oil imports at $345 million during this period.

Sources close to the central bank say it sold $375m-$400m during the entire month of November to enable banks to pay oil import bills on behalf of their clients. End-month data for foreign exchange would be out later next week.

Till November 20, Pakistan's total liquid foreign exchange reserves that is the reserves held by both the central bank as well as the banking system stood at $12.083 billion, down from $12.253 billion at end-October.

SBP sucks in Rs9.2bn: The State Bank on Tuesday sucked in Rs9.2 billion from the inter-bank money market through sale of one week repurchase agreements of treasury bills at 2.5 per cent.

The open market operation (OMO) conducted for this purpose generated Rs10 billion bids, of which the central bank accepted Rs9.2 billon and rejected the rest. The OMO did not attract any bid for two-week repo of T-bills.