Pakistani rupee ends steady despite rating downgrade
Reuters - Saturday, November 15
KARACHI, Nov 14 - The Pakistani rupee ended marginally firmer on Friday due to some inflows and dealers said Standard & Poor's cut in the country's sovereign ratings had no impact as it came out after market hours.
Standard & Poor's cut its sovereign ratings on Pakistan further into "junk bond" territory on Friday, highlighting risks that the country could default on its debt obligations. [ID:nT68918]
The rupee ended at 80.15/25 to the dollar, compared with Thursday's closing of 80.29/39. The rupee is 23 percent weaker since the start of the year.
Dealers said they were closely watching for Pakistan to secure an emergency package from the International Monetary Fund.
Pakistan has asked the IMF for a $9 billion bailout along with help from other lenders to avert a balance of payment crisis, a finance ministry official said on Friday. [ID:nSP61519]
A government official told Reuters on Friday that the letter of intent would probably be sent before Monday, when potential donors are due to gather in Abu Dhabi for a "Friends of Pakistan" conference.
Pakistan is currently facing a balance of payment crisis with inflation running over 25 percent, widening current account and fiscal deficits and depleting currency reserves.
State Bank of Pakistan's reserves fell to $3.5 billion from $3.53 billion in the week to Nov. 8.
The central bank spokesman said on Friday it received $200 million from the Islamic Development Bank on Nov. 7 as the country's reserves are barely enough to cover nine weeks of imports.
The State Bank of Pakistan on Wednesday hiked its discount rate 200 basis points to 15 percent to curb inflation, currently running over 25 percent, reduce the current account and fiscal deficits, and build foreign currency reserves.
Dealers said it would also help in calm the market.
Some analysts suspect the central bank was under pressure from the IMF to to raise rates.
A finance ministry official said on Friday the IMF would like to see Pakistani interest rates above the core inflation rate, currently running around 18.3 percent.
An artificial floor put under the stock market in late August prevented the Karachi Stock Exchange benchmark 100-share index <.KSE> from registering the negative impact of a sharp rate rise.
The floor was imposed to protect a market that is down 35 percent since the start of the year, but it has killed off trading and locked in investors who might otherwise make a swift exit.
The index ended flat at 9,184.09 on Friday.
Authorities said last month the floor would be removed once a 20 billion rupees government support fund was in place.
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