Rupee approaches record low

KARACHI: The rupee weakened by 0.29 percent against the dollar on Friday, approaching a record low, as dealers cited rising demand for the greenback and low foreign exchange inflows.

The rupee ended at 295.78 per dollar, compared to Thursday's close of 294.92. In the open market, the currency fell by 1 rupee to settle at 302.

The rupee hit an all-time low of 298.9 against the dollar in May. Dealers said the rupee has been under pressure since the caretaker government assumed power. They said that the structural reforms that will be implemented after the creation of an interim cabinet are expected to make the currency unpredictable. Low export and remittance numbers have also put pressure on the Pakistani rupee.

A rise in demand for foreign currency as import restrictions were relaxed and foreign exchange inflows dried up, and a generally stronger US dollar relative to other major currencies all contributed to the rupee's decline in the interbank market, according to dealers.

Pakistan's real effective exchange rate (REER), the value of the rupee against a basket of trading partner currencies, appreciated to 91.6 in July from 87.7 in the previous month, according to the figures from the State Bank of Pakistan on Friday. REER is a measure of how much value a currency has gained or lost in terms of inflation with a basket of trading currencies. However, analysts said that given Pakistan's ongoing dollar shortage, a gain in REER is currently immaterial.