KARACHI, May 15: The Pakistani rupee fell sharply on Tuesday on higher demand for the dollar in the inter-bank market but dealers said the local unit was unlikely to fall much further.

The rupee closed at 60.76/78 to the dollar, down from Monday's close of 60.60/62.

“There has been higher demand for the dollar over the last couple of days, which has put downward pressure on the rupee,” said a dealer at a foreign bank.

“However, the rupee is unlikely to go further down, as dollar inflows are pretty healthy,” he said.

Dealers said the rupee was expected to stay range bound around these levels because of healthy inflows of the US currency in the form of foreign investment as well as remittances from Pakistanis working abroad.

In the money market, Pakistani banks were again forced to borrow money from the central bank's discount window, as the inter-bank market remained illiquid because of an absence of cash inflows.

Overnight call rates ended at 9.4 per cent, unchanged from Saturday, and just below the discount rate of 9.5 per cent at which banks borrowed Rs11.525 billion from the State Bank of Pakistan's three-day repo facility.

Banks borrowed Rs11.5 billion from the facility on Monday.

Rates were glued to these levels most of last week amid a lack of cash inflows, while the central bank also stayed away from the market and has not injected funds to support it.

Dealers said there are no major cash inflows scheduled this week, so rates were unlikely to fall and discounting was likely to continue. —Reuters