The rupee climbs up one paisa against dollar on Monday after hitting its lowest during the weekend. Dealers said that 1-dollar was bought for 86.20 rupee and sold for 86.24 rupee.
State Bank of Pakistan announced in its weekly statement that foreign exchange reserves rose to a record 16.7 billion dollars in the week ending September 24, 2010. Foreign exchange inflows from export receipts and remittances sent by overseas Pakistanis are not sufficient to strengthen rupee. Rupee is likely to weaken further.
‘Reformed general sales tax’ (RGST) rate announcement and implementation was postponed last month that created doubts in the market and led to tumbling rupee.
Money traders increased dollar stocks to deal with the imposition of ‘reformed general sales tax’ (RGST). The tentative political and economic conditions also led traders to buy dollars.
The State Bank increased the interest rate from 13 percent to 13.5 percent, and export refinance rate from 8.5 percent to 9 percent to manage inflation that could negatively impact industrial production and exports.
Many countries have slashed interest rates to encourage investment and enhance industrial production. Enhanced interest rates can lead to lower industrial production and decreased exports. Despite State Bank’s attempt to control inflation by increasing interest rates, prices are still climbing to new heights.
This year rupee shed 1.19 percent in value, whereas in 2009 rupee lost 6.17 percent. Continuation of uncertain political and economic conditions can reduce rupees value even further.
The rupee dropped against other currencies also. Between July, 1st 2009 and September, 27th 2010 rupee fell 1.88 percent against euro, shed 2.15 percent versus pound sterling, lost 17.70 percent against yen, dropped 16.72 percent versus Canadian dollar, and fell 21.01 percent against Australian dollar.