KARACHI, July 4: A lull in dollar demand from importers helped the rupee steady on Friday from a record low set the previous day, but dealers said outlook remained bearish.

The rupee closed at 69.55/60 to the dollar, off Thursday’s record closing low of 69.80/88.

The rupee is now back at levels last seen in late May, when a precipitous fall prompted the central bank to take steps to stabilise the currency and dampen speculation.

But there has been a steady drip in foreign currency reserves since then because of the weight of demand for dollars from importers, particularly oil buyers.

The currency has dropped 13 per cent this year as the economy feels the brunt of rising oil and food costs.

“Until the fundamental problems such as the widening fiscal and current account deficits are not resolved, it’s unlikely the rupee will recover,” said a dealer.

Traders said central bank intervention would stabilise the rupee in the short run but State Bank’s reserves are running low.

Foreign exchange reserves have fallen to just $11.3 billion, in spite of fresh inflows coming in, from a record high of more than $16 billion in October.

Traders said the central bank would probably have to increase interest rates in a policy review later this month to try to bring rising prices under control.

Analysts feared political infighting was distracting attention from restoring economic stability, though a budget announced last month set targets to bring down an unsustainable fiscal deficit, and the government is seeking loans from friendly governments and multilateral lenders.---Reuters