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Pakistan rupee hits 83 against US dollar

KARACHI - The prolonged rumours of a Pakistani default with international creditors sent the rupee heading downward Tuesday. At one point it hit a record low of 83 against the US dollar, traders said.

As the trading day closed, it stood at 81/81.50 against the dollar in the open market. That compares with its 80/80.40 close on Monday.

A reported severe shortage of dollar prompted the market gyrations.

"Some who have vested interest and have nefarious design to destabilize the rupee quoted up to 83," said Nabeel Iqbal, research director at Khannai and Kalia, the country's largest foreign exchange firm.

There was a run on banks and exchange companies soon after Pakistan's two leading news channels, GEO and CNBC, flashed news of the rupee's loss in value.

The rupee also slipped in the interbank market to 81/81.50 against the dollar, versus 79.37/79.42 on Monday.

"In two to three weeks the situation could worsen if Pakistan does not receive any foreign aid, as the country's debt and corporate payments are maturing from November," Iqbal said.

Pakistan's foreign exchange reserves have been halved in the last six months. The central State Bank of Pakistan's own reserves have plunged to 4.68 billion dollars, barely enough to meet one month of imports.

Tuesday's late decline in the rupee was surprising, given a central bank report showing a 25 per cent increase in remittances from Pakistanis living abroad.

Pakistan gets around 6.5 billion dollars each year from over 3 million Pakistani expatriate workers, mostly from the United States and the Middle East.

The rupee has depreciated by around 25 per cent since January. The country's external debt servicing cost is 3 billion dollars a year, including 500 million dollars set to mature in February.