KARACHI, Aug 22: Rupee fell steeply against the US dollar on Friday but recovered before the closing of the market, thanks to the State Bank of Pakistan which pumped millions of dollars to support the local currency.

The rupee fell twice to 77.20 against the dollar during the day which was a record low, but it recovered with the help of inflows and closed at Rs76.50.

Bankers said the State Bank finally entered the market to support the rupee facing frequent devaluation as it lost more than one-fifth of its value since the beginning of this year.

Bankers said the State Bank pumped at least $50 million through two large banks. However, currency dealers said it was the stuck-up dollar reserve which entered the market and the selling pressure slashed US currency.

The State Bank, which never accepts buying or selling of dollars, has been out of the market for more than six months.

It was mainly because of its depleting reserves which fell to half of what it was 10 months back.

Currency dealers said the rupee entered a most difficult area where even importers stopped buying dollars as a steep fall of the local currency has put them out from the cost-effective trading arena.

“Though importers rush for buying dollars, but a steep fall of rupee on a daily basis may convince them to stop doing business in this country where cost of doing business is rising with the passage of each day,” said Atif Ahmed, a currency dealer.

Currency dealers found no reason to hope for the recovery of rupee as all indicators are negative and against the strengthening of rupee.

“By touching 77.20, the rupee showed its elasticity and may touch that level in one or two sessions,” said the dealer.

Both bankers and dealers said the stability of exchange rate can come only with the building of foreign exchange reserves of the county which fell to $9.6 billion.

They said that the reserves of over $16 billion proved effective giving sound backing to the local currency against the dollar and all other major currencies.

Rupee has been losing against all major international currencies which the economists said was reflection of weakness of the economy.

The first month, July trade imbalance reached $1,195 million against $899 million of July last year. It also showed the volume of foreign trade rose substantially high demanding more dollars to continue the trend.

Importers said the rising demand and falling foreign exchange reserves have an inverse relation. If this equation is not changed, the situation will soon reach a point of no return.

“Finally we will have to seek IMF help as a last resort and put the entire nation under the harsh conditions which the IMF used to prescribe for the successful use of loans,” said Abid Saleem, an analyst.