KARACHI, April 24: The rupee ended at a record closing low on Thursday, breaching a previous low set days after Pakistan was pitched into the centre of a global storm by Al Qaeda’s attacks on the United States in September 2001.

The rupee closed at 64.50/55 to the dollar, weakening from Wednesday’s 64.32/64.37, and sinking below the previous closing low of 64.46 on September 22, 2001.

“This is not a good sign,” said an economist who requested anonymity for fear of upsetting the authorities. “The rupee’s value is a psychological barometer of the country’s economic strength and the central bank should take steps to support it.”

A less than one month old coalition government is faced with acute challenges over widening fiscal and trade deficits, exacerbated by the high cost of imported oil and rising food prices.

Intervention by State Bank of Pakistan (SBP) lifted the rupee off an intra-day low of 64.68, just a shade away from the weakest levels of 64.70/75 dealers recalled seeing during the dark days of September 2001.

“Any intervention by SBP in exchange market is aimed at moderating the rate of exchange and preventing abrupt fluctuation in exchange rate rather than establishing a level for it,” Governor Shamshad Akhtar told Reuters.

The central bank chief said the bank was exercising “strong vigilance” over financial markets and would “continue to support foreign exchange stability to curb excessive short term fluctuation”.

The rupee has been under pressure from increased demand from importers, particularly for oil payments, dealers said.

“Demand for the dollar is huge, and the inflows are certainly not sufficient to meet that,” said a dealer at a local bank.

“If the situation persists, we may even see the rupee breaching the 65 per dollar mark in a few weeks,” he said.

The economist said the central bank, which closely shepherds the exchange rate, should consider aggressive monetary tightening to curb import demand, as well as intervention to support the currency.—Reuters