Rupee down vs dollar; o/n rates fall

KARACHI: The rupee weakened on Monday because of increased import payments especially for oil, and dealers said the local unit is likely to come under further pressure in the medium term because of a bleak outlook for the country's economy.

The rupee ended at 89.10/15 to the dollar, compared with Friday's close of 89.00/10. It dropped to a record low of 89.45 on Wednesday.

"The rupee's weakest traded level was 89.18 today and there were payments of about $80 million," said a bank dealer.

Country's bleak economic outlook could further punish the rupee in the medium-term.

The International Monetary Fund forecasts economic growth for the 2011/12 fiscal year at 3.5 percent, lower than the government's target of 4.2 percent.

Current account deficit stood at $1.6 billion in July-Oct compared with $541 million in the same period a year earlier.

Islamabad has to start repaying an $8 billion IMF loan in early 2012, and without additional sources of revenue, its foreign exchange reserves may come under pressure, analysts say.

Foreign exchange reserves fell to $16.68 billion in the week ending Dec. 2. They hit a record $18.31 billion in the week ended July 30.

In the money market, overnight rates closed lower at between 9.50 percent and 10 percent, compared with Friday's close of 11.90 percent amid increased liquidity in the interbank market. (Reuters)