December 05, 2006	Tuesday	Ziqa'ad 13, 1427

KARACHI, Dec 4: The Pakistani rupee slipped to a near 25-month low on Monday as banks bought dollars for import and year-end debt payments and dealers said it would remain under pressure in the near-term.The rupee ended at 60.92-60.94 to the dollar, down from 60.86-60.88 on Saturday, and its lowest since October 2004.

Dealers said some banks rushed to buy the dollar, fearing a further decline in the rupee, expecting fresh demand of more than $100 million from year-end debt payments in addition to normal daily demand of $30 million to $35 million.

A dealer at a local bank said a number of banks had short dollar positions in the spot market and were facing difficulty meeting clients' cash demands.

“The market is now facing a shortage of cash dollars, and people are a little worried why the central bank is staying away from the market,” the dealer said.

The central bank has not intervened in recent sessions, dealers said.

The situation is further aggravated by exporters who withheld proceeds in anticipation of a further depreciation in the rupee's value.

Dealers said the rupee would remain weak during December as corporate had returned to the market to cover dollars.

An analyst said the weaker rupee reflected the country's widening trade deficit and slowdown in foreign currency remittances.

The trade deficit for the first four months of fiscal 2006-07 stood at $4.008 billion, compared with a deficit of $3.399 billion in the same period a year ago.

In the money market, short-term call rates remained firm and dealers said a regular Treasury bill auction this week would determine the liquidity situation.

Overnight rates closed at around 8.75 per cent, up from 8.25 per cent on Saturday.

An inflow of about Rs71 billion is due this week, and the movement of rates would depend on how much liquidity the central bank left in the market after the auction, dealers said.—Reuters