KARACHI, Aug 11: The State Bank seems set to keep the dollar below Rs59 and continues to make interventions for this purpose. The central bank on Wednesday sold more dollars into the inter-bank market but the amount could not be ascertained.

Some bankers estimated the dollar selling by the SBP between $5-$10 million. On Tuesday also the SBP had sold at least $10 million to help the rupee keep its head above 59 a dollar.

Bankers close to SBP say the central bank sold at least half a billion dollars into the market between July 1-August 10, 2004 to keep the dollar below Rs59. But despite that the rupee lost about 1.4 per cent value to a dollar during this period on the back of rising world oil prices and heavy dollar buying by the importers.

Bankers said the rupee closed at 58.89 a dollar on Wednesday up slightly from 58.91 on Tuesday. But they said the rupee had traded as low as 58.94 during the day when a major cement company was shopping around for $35 million for forward buying.

It could not be learnt immediately if the company finally bought the required amount of foreign exchange. But bankers confirmed that it managed to buy at least $7-$8 million. They said the SBP intervention helped the rupee close at 58.89 a dollar.

Bankers said what else provided a breathing space to the rupee was that exporters resumed selling export proceeds. Earlier they were delaying sale of proceeds though remaining within the time limit set by the State Bank as they anticipated further loss in the rupee value.

Bankers said exporters resumed normal selling after the volatility in exchange rates seen earlier this month eased off. "Exporters have resumed normal selling but we have not seen an unusually large inflow of export proceeds," said a local banker.

What is perhaps more important is that the trend to hold back export proceeds on one pretext or the other is also waning thereby giving the rupee a breathing space.

Most exporters started delaying sale of export proceeds on one pretext or the other and importers went for heavy forward dollar buying as volatility hit exchange rates earlier this month. This further intensified the pressure on the rupee and it once touched a two-year low of 59.40.

This invited repeated injections of dollars by the State Bank to calm down the pro-dollar sentiments. The SBP also convinced Pak-Arab Refinery Co to roll-over a $100 million instalment out of a $355 million dollar-rupee swap it had contracted with a consortium of banks in June.

Moreover, the central bank warned some banks to desist from promoting speculative dollar buying by their customers. But the banks pleaded innocent and took the view that all corporate buyings were made within the rules set by the SBP.

As the dollar rose steeply between July 1-August 10 importers made heavy forward buying of dollars in anticipation of further loss in the rupee value thereby intensifying the pressure on the local currency.

On the other hand the exporters who had obtained foreign currency loans from banks against export receivables bought dollars from the market to repay the same before maturity.

They did this anticipating that a further fall in the rupee value would mean substantial exchange rate loss under these deals. Bankers say this also added to the pressure on the rupee value.

"Some exporters might be doing this-but certainly not many of them," said ex-chairman of SITE Association of Industry Mr. Majyd Aziz. Senior bankers say that the practice still continues but it has slowed down.

"Most exporters seem to have realized that the rupee may remain stable for the time being. So this trend has slowed down though it still goes on," said treasurer of a local bank.