KARACHI, Aug 6: The gradual depreciation once again put the rupee close to record low against the dollar reflecting the rising demand for the greenback as well as the weakness of the economy.

The rupee-dollar parity witnessed further domination of the US currency on Wednesday while the rupee touched 72.55, just below the 30-year record low, recorded in first week of July.

In the first week of July rupee fell to 72.95, which prompted the State Bank to intervene and save the erosion of market value of the Pakistani currency.

The SBP immediately cut down the trading time of the currency dealers, suspended forward booking system and cut the advance payment against import to 25 per cent from 50 per cent,

The SBP decoded to provide foreign exchange to the banks for the import of all categories of furnace oil. The central bank had been providing oil import bills up to 70 per cent while the private sector was responsible for import of about 30 per cent oil. However, SBP once again took the entire responsibility to pay oil bills, the biggest bill in the list of imported items for the country.

“This responsibility proved counter productive for the State Bank as its reserves fell sharply, while the foreign exchange reserves of commercial banks increased substantially,” said a currency dealer.

He said the decision to take extra responsibility did not pay-off, instead it overloaded the central bank, which sharply slashed its reserves and the falling reserves sent a negative message to the currency market.

The last available State Bank’s data for the week ended on July 26, shows that the reserves of the SBP fell by $330 million to $7.448 billion. Contrary to this, the reserves of the commercial banks have improved by $89 million to $3.039 billion. “The figures show that the SBP’s decision to pay all oil bills did not succeed to restore the rupee value nor it helped the SBP to curb the speculative forces,” said the currency dealer.

The rupee has lost about 17 per cent against the greenback since the beginning of this year and a massive erosion of foreign exchange reserves of the State Bank by $5.087 billion putting the entire economy under pressure.

While the record trade and current account deficits have been haunting the government, the failure to bring foreign exchange into the country also proved fatal for the market sentiment.

“The SBP and the government have been announcing to bring $3.5 billion till the end of the fiscal year ended on June 30, 2008 but the failure damaged the market trust for both of them,” said Atif Ali, a currency dealer.

The currency dealers said on Wednesday the importers’ demand of dollars had also risen suddenly while large payments were made by the banks.