KARACHI, July 26: The rupee hit a near 21-month low on Thursday amid higher dollar demand from importers, but dealers said the rupee was likely to remain range-bound in the days ahead.

The rupee closed at 60.36/38 to the dollar, down from 60.31/33 a day earlier. This was the weakest closing for the rupee since November 4, 2004, when it fell to 60.50/52 per dollar.

“There were some oil payments in the market, for which the central bank was buying dollars,” said a dealer at a local bank. “But the rupee is unlikely to fall much as dollar supplies are healthy.” Another dealer said the central bank also conducted rupee-dollar swaps to build up reserves, which increased the demand for the dollar in the inter-bank market.

The State Bank has allowed a gradual depreciation of the rupee in recent months, but analysts are of the view that it will not opt for any significant depreciation of the rupee despite a ballooning current account deficit.

The central bank has been voicing concerns over a current account balance that has swung from a $1.8 billion surplus in 2003-04 to an estimated $5.7 billion deficit in 2005-06.

In the money market, short-term rates eased marginally, but dealers said they will rise again as banks would need cash to meet increased cash reserve requirements. Overnight call rates eased to around 8.5 per cent from 8.9 per cent on Tuesday.—Reuters