February 23, 2006	Thursday	Muharram 24, 1427

KARACHI, Feb 22: All major currencies except Pak Rupee witnessed a big slash in their values against the greenback during 2005 mainly, because of higher oil prices, which kept the demand for dollar high the world-over.

The latest official documents showed that euro recorded a sharp decline of 13.17 per cent in value against the dollar during 2005, which it had been gaining significantly against the US currency during 2002 to 2004.

The Japanese yen lost 12.03pc against the dollar during the said year, while the highest decline noted in the value of Swiss Frank, which was 13.90 per cent.

The Pound sterling also registered a decline of 10.85 per cent in its value. However, Pak rupee recorded a slight decline of 1.18 per cent. The neighbouring Indian currency lost 3.49 per cent during the period.

“It is not the weakness of Pak rupee but the strength of greenback which has been gaining against all major currencies for more than a year,” said Asif, a currency dealer.

Analysts said the higher oil prices have unexpectedly increased dollar demand the world-over as all payments for oil are made in greenback. The year 2005 witnessed 70 to 80pc hike in the oil prices which witnessed sudden jump in demand for dollars.

Oil prices reached a record high to over $70 per barrel during the year 2005, which compelled most of the oil importing countries to buy more dollars for oil payments.

The oil price hike gave a fresh life to the greenback which had lost 44 per cent against euro in the previous three years from 2002 to 2004. The dollar has been losing against all major currencies during the three years and the experts expressed strong doubts about its existence as a reserves currency for the world.

However, the oil price hike charged the ailing dollar and a new huge demand was created through the oil trading and raised pricing.

“Pakistan is not the exception as every major currency has lost its value. Pakistan’s oil payment has been rising putting enormous pressure on its small reserves. The oil payments might reach up to $6 billion this year,” said Asif.

The State Bank’s purchasing of greenback from the banking system is enough to put pressure on Pak rupee to slash its weight. However, the SBP uses pressure tactics to curtail the price as it continues to buy and sell dollars.

The rupee lost 4 paisa against the dollar to cross the barrier of Rs60 on Tuesday, while it remained above Rs60 on Wednesday.

Analysts see further devaluation of rupee against the dollar sighting the world trend supporting the greenback. They said the government wants to keep the exchange rates stable for the stability of the economy. But, at the same time, it wants to provide more benefits to the exporters who would ultimately bring more dollars for the country.

“Pakistan is exceptional in the sense that its trade deficit is reaching the limit beyond control which again puts pressure on the demand for the greenback to meet the balance of payment requirement,” said an analyst. The current account deficit could reach $6 billion by the end of the current fiscal, he said.

The oil price hike has already hit the economy and analysts said that the major outcome is high inflation. They believe that the high inflation would prevail with the high oil prices.