KARACHI, Dec 31: The rupee lost 17 paisa against the US dollar this month falling to 57.40 a dollar on December 31 from 57.23 on November 25 - the last working day of that month.

But in October- December 2003 the rupee gained 47 paisa or 0.8 percent against the greenback rising from 57.88 at end-September to 57.40 at end- December.

Senior bankers say that the rupee fell slightly this month on increased government and corporate debt payments. They say that the 47 paisa gain the rupee recorded in October-December only partly reflected its strength vis-a-vis the dollar.

The dollar should have fallen by a much wider margin had the State Bank not been mopping up surplus foreign exchange inflows from the market.

The central bank had started sucking in forex inflows from the banking system when it was inundated by such inflows after September 11, 2001 terror attacks on the USA.

This was necessary to ensure that the dollar does not fall to unmanageable lows creating problems for the exporters and also to keep rupee funds from over-flowing.

Thanks to this policy the US dollar has lost only 41 paisa against the rupee falling from Rs57.81 at end-June to Rs57.40 at end-December 2003. In the last fiscal year the dollar had recorded a depreciation of 3.7 per cent in its value despite SBP interventions to keep it strong for the exporters.

Senior bankers say the State Bank would find it difficult to keep the dollar strong in the second half of this fiscal year i.e. between January-June 2004.

They say that a $1.078 billion pre-payment of external loans coupled with regular government and corporate debt payments may exert pressure on rupee-dollar parity.

They say this scenario becomes all the more likely because of falling remittances and foreign direct investment. But with the privatization proceeds of Habib Bank valuing more than $380 million should compensate the shortfall in FDI.

The SBP in its first quarterly report for FY04 released on Tuesday said that large current account surplus suggests the dollar-rupee parity would remain stable in the second half of this fiscal year also.