KARACHI, Nov 8: The rupee gained eight paisa against the US dollar in the inter-bank market on Monday as banks preferred not to buy dollars fearing it may fall further.

Senior bankers said the rupee closed at 59.70 a dollar, up from the weekend closing of 59.78 as importers slowed down dollar buying and exporters accelerated selling. They said the rupee saw an intra-day high of 59.58 a dollar though towards the end of the day it was trading around 59.68/59.75.

The local unit has recovered 2.7 per cent of its lost value against the dollar so far during this month, after having lost 5.5pc value to a US unit in July-October. The rupee began to recover, after hitting a three-year low of 61.36 to a dollar at end-October, after the State Bank started providing dollars to the banks for financing crude oil imports and also intervened heavily at times to cool off pro-dollar sentiments.

A huge trade deficit of $1.432 billion in July-October 2004, on the back of higher oil prices, had weakened the rupee. This prompted the SBP to tighten rules governing the foreign exchange market and pay for oil imports to stabilize it.

T-BILLS: The State Bank will sell six-month treasury bills on Wednesday, it announced on Monday adding that the sale target has been set at Rs5 billion.

Senior bankers said the target was too small and was seemingly aimed at preventing the yields from rising too fast. They said the SBP may allow the yield on six-month paper by 15-20 basis points in line with its policy of raising the interest rates gradually and in a measured fashion to fight rising inflation.

The central bank had last increased the weighted average yield on six-month bill by 19 basis points to 3.19pc in mid-October.