KARACHI, April 30: The rupee eased against the dollar on Wednesday, as dealers forecast further weakness because of the prevailing high demand from importers.

There is speculation that the State Bank of Pakistan will raise its discount rate, currently 10.5 per cent, by 100-150 basis points to curb import demand and a burgeoning fiscal deficit.

The rupee closed at 64.56/61 to the dollar, weakening from 64.45/50 on Tuesday, but still stronger than a closing low of 64.66/70 set on Friday.

The central bank took an administrative step on Wednesday to increase dollar supplies in the inter-bank market.

The SBP ordered foreign exchange companies to sell in the inter-bank market 15 per cent of foreign currency received in the form of remittances from Pakistanis working abroad.

Previously the exchange companies only had to sell 10 per cent to the inter-bank market. “Central bank measures would help slightly in improving dollar supplies, but dollar demand still remains very high, and so it is unlikely that the rupee will gain much in near term,” said a foreign bank dealer.

High dollar demand from importers, particularly for oil payments, caused the rupee to breach previous lows 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 is down about 3 per cent this month and 4.8 per cent so far this year.

In the money market, overnight call rates ended at 5.5pc, down from 7.0pc a day earlier despite a central bank three-day repo that mopped up Rs8.5 billion from the inter-bank market.

Dealers said they expected another open market operation on Friday, when over Rs37 billion would flow into the market from maturing government securities. —Reuters