KARACHI, Jan 25: The rupee gained eight paisa against the greenback in the inter-bank market in two days, closing at 59.27 a dollar on Tuesday from 59.35 on the last working day before Eidul Azha holidays.

The rupee has gained 16 paisa or more than a quarter per cent value against the dollar so far during this month. It had closed at 59.43 a dollar last month. Bankers say the local unit has been on the rise due to increased inflow of remittances from overseas Pakistanis plus faster sale of export proceeds amidst depressed demand for dollars from importers.

After losing 5.5 per cent value against the dollar in the first four months of this fiscal year i.e. between July-October 2004, the rupee has made a huge recovery-primarily due to the State Bank decision to sell dollars to banks for financing oil imports.

Since the beginning of November last, when the SBP started this practice, the rupee has recovered 3.24 per cent value against the US unit, moving up to 59.27 a dollar on Tuesday from 61.37 at the end of October last.

The SBP dollar selling coupled with tighter controls introduced to check speculation against the local currency has strengthened the rupee by shifting oil-related foreign exchange payments from banks onto the central bank.

The consequent recovery in the rupee value has emboldened exporters to sell export proceeds, much faster than in the past in anticipation that the rupee may rise further. The same anticipation has depressed dollar demand by importers.

This, coupled with higher inflow of foreign direct investment, in the past three months amidst the fall in the dollar value in the international markets has created a pro-rupee environment.

This has narrowed the difference between the inter-bank and open market exchange rates, encouraging overseas Pakistanis to send more remittances through official channels. Higher inflow of such remittances has, in turn, also contributed to the recovery in the rupee value.