Rupee slips, stocks slide

KARACHI: The rupee sharply fell 5.3 percent against the dollar to an all-time low of 128 on Monday in an apparent devaluation by the central bank as shrinking forex reserves are exerting pressure on the country's external account.

The central bank said the rupee closed at 128 per dollar in the interbank market against the closing level of Rs121.55 the previous day. The Stocks exchange slid by 600 basis points, while country debt increased by Rs800 billion.

“… this adjustment in the exchange rate along with the increased policy rate and other administrative measures would help contain domestic demand in general, and reduce imbalances in the country’s external accounts in particular,” the State Bank of Pakistan (SBP) said in a statement.

Rupee has lost approximately 20 percent against the dollar since December last. It lost about four percent in June, after weakening 10 percent in March this year and December last. The SBP said strong demand for imports had pushed the country’s current account deficit to the levels not sustainable beyond the short run despite a double-digit growth in exports. “This movement in the exchange rates reflects the demand-supply gap of the foreign exchange in the interbank market.”

Rupee traded as high as 129.4 against the dollar in the early hours of the market. The local currency, however, closed at 128.75/dollar in the kerb market, compared to the previous level of 124.10.

The benchmark KSE-100 Index lost 605 points and was below 40,000 points in the first half of trading. The benchmark index was at 39,665 points. The debt was up by Rs800 billion.