KARACHI, Sept 23: The rupee went down to 59.36 a dollar on Thursday, from 59.17 a dollar on Wednesday in the inter-bank market, showing a big decline of 19 paisa or 0.3 per cent of its value in a single session.

This happened as banks made heavy buying of greenbacks to cover their short positions and to meet importers demand. The rupee suffered such a big loss for the second time in less than two months. Earlier, it had lost 26 paisa to a dollar on August 3, after more than two years.

The Thursday's fall of 19 paisa in rupee value has weakened the local unit by 2.1 per cent so far during this fiscal year i.e. between July 1 and September 23, 2004.

Senior bankers said that the central bank refrained from making a forceful intervention to check the steep rise of the dollar though it did sell a couple of millions of dollars through a high-profile American Bank. It could not be learnt immediately if other banks also sold dollars on behalf of the State Bank. At times they do, when asked by the SBP.

Sources close to the central bank said SBP high-ups made inquiries at the Exchange & Debt Management Department to learn about specific reasons for a big fall in the rupee value on Thursday.

They said the high-ups noted that the exchange rates could have been managed in a better way had EDMD taken the top management into confidence before making some market-based moves on their own to stabilize the rupee.

These sources said a key factor that had led to the recent fall in the rupee value was that earlier the SBP people responsible for managing exchange rates had rather forced a number of banks to run short positions in foreign exchange holdings.

"That bubble has burst now," said treasurer of a local bank meaning that the banks that had been refrained from buying dollars in the past were piling up their needs and are now making big dollar purchases.

Sources close to the central bank said that the SBP governor Dr. Ishrat Husain has taken strong notice of the volatility in exchange rates and directed the officials concerned to take corrective measures. "These measures will definitely include a forceful intervention by the SBP if the exchange rates show further volatility," one of the sources said.

A boom in international oil prices has started pushing up Pakistan's import bill thereby putting the local currency under pressure. Gradual lifting of the restrictions on capital outflows is also responsible for weakening the rupee. That forward oil prices continue to march ahead threatens to keep the pressure on the exchange rates intact.

Monetary authorities are making their best efforts to avoid volatility in exchange rates but at times it becomes just too difficult for them to do this. "As elsewhere in the world, Pakistan's exchange rates are also vulnerable to self-fulfilling prophecy cycles," said an official of Exchange & Debt Management Department of the State Bank.

"When the market players (bankers and importers, exporters) take a view of where the rupee will be after some time and they also start behaving accordingly it becomes quite difficult to manage the rates," he said.

DISCOUNTING: "How serious we are in avoiding a steep fall in the rupee value is evident from the fact that we are keeping the money market extremely tight," said the official.