KARACHI, July 3: The rupee sank further against the US dollar to a record low of Rs69.90 on Thursday, while currency dealers said the local currency would keep on sliding as it has been “unofficially” linked with petrol price in the market.

With the beginning of the new fiscal year, the dollar moved faster to depreciate the local currency and it touched the record price.

The rupee had sunk to Rs69.40 against dollar in mid-May, but later it recovered mainly and gained strength from the tall claims of State Bank of Pakistan and the government.

The SBP assured the market that a sum of $3.5 billion was expected till June 30. These dollars were to come from friendly countries and donor agencies.

Frequent announcement of expected inflow of $3.5 billion boosted sentiments in the currency market and the rupee gained artificial strength.

“Now the claim of $3.5 billion proved false and the rupee lost hope to show strength against the US dollar, of which the demand is so high that it never was,” said Atif Ahmed, a currency dealer in the inter-bank market.

The currency dealers have similar views that the announcement of $3.5 billion inflow was to retain the rupee depreciation to a certain level till the end of the fiscal 2007-08.

However, currency experts and dealers discovered a strange relation of rupee with the petrol (motor-sprit) prices in the country and believed that it was unofficially linked with each other.

They said the rupee was allowed to depreciate against the dollar to the price of one litre motor sprit.

“The rupee was at Rs68 to Rs69 (equal to a US dollar) until recently which was the price of one litre petrol and now petrol price has increased to about Rs76 per litre,” said Atif.

He said the rupee has been set free to chase the petrol price and depreciate against the dollar to Rs76.

“The government wants to sell petrol for one dollar per litre which may save it from shocks of ever-increasing petrol prices in the world market,” said another currency dealer.

“The government has started withdrawing subsidy on oil prices and passing on the impact to consumers. The higher oil prices may yield more money as sales tax for the government,” said the dealer.

However, all major world currencies have shielded themselves from record-breaking oil prices by appreciating their currencies against the US dollar. The euro, yen, pound and the Canadian dollar have substantially appreciated against the greenback to offset the impact of increasing oil prices.

The dealers said the dollar demand was high as fiscal year has ended and a lot of payments are in the pipeline, waiting to be made.

At the same time, both the central bank and private importers of petroleum products were in the market to buy dollars. The daily oil price increase in the world market compels the importers to buy more dollars, thus pressuring the exchange rate.

The currency dealers were sure that the rupee would lose further against the greenback “until inflows from friendly countries prove true and reserves of the SBP rise.”

According to data issued on Thursday, the SBP’s foreign exchange reserves fell by 35 per cent or $4.685 billion in the fiscal 2007-08.