KARACHI - The Pakistani rupee weakened to a record low of 69.82/88 to the dollar in early trade on Thursday, as the currency remained under pressure because of import payments, particularly for oil.

The rupee had closed at 68.90/69.05 to the dollar on Wednesday. A previous low of 69.60 was set on May 20.

The central bank subsequently took steps to stabilise the rupee and dampen speculation against it, but there has been a steady drip in foreign currency reserves because of the weight of demand for dollars from importers.

“Sentiment is negative and there is no good news,” said a dealer in Karachi. The currency has dropped 13.3 per cent since the beginning of the year as the economy feels the brunt of rising oil and food costs.

Pakistans annual inflation has jumped to a three-decade high and it is also facing widening fiscal and current account deficits.

Traders said central bank intervention would stabilise the rupee for the short-term but the outlook remained bleak as the State Banks reserves, apart from last week, had been falling.

A fall in foreign exchange reserves to just more than 11.2 billion dollars from a record high of more than 16 billion dollars in October leaves little room for currency intervention to support the rupee, dealers said.

Traders said the central bank would probably have to raise interest rates at its next policy review in July to try to bring rising prices under control.

The rupee has also been coming under pressure as foreign investors have been selling their holdings of Pakistani shares, which have been sliding because of worry about political and economic stability.

The Karachi Stock Exchange index, which attracted much foreign interest last year, has fallen 14.4 per cent since the beginning of the year and is 23.5 per cent lower than a life high set on April 21.

On Thursday, the index was down 0.67 per cent to 12,044.55 by late morning, falling for the fifth consecutive session in extremely thin turnover.

“What can I tell you? Theres a lack of confidence, no volume and no interest,” said Shuja Rizvi, director of broking operations at Capital One Equities Ltd.