Pound at two-year lows while Pak rupee marks record fall

The British pound hit two-year lows against a broadly stronger dollar while the Pakistani rupee marked a record closing low yesterday on investor fears persistent political tension and a weak economic outlook would drag on the currency in coming weeks.

The pound's latest bout of weakness acted as a catalyst to help a recently revived dollar gain against other major rivals, including the euro. But trade was thin in Europe due to a UK public holiday.

By 1033 GMT, sterling was trading down 0.2 per cent on the day at $1.8482, having fallen as low as $1.8407 in the global session – its lowest since July 2006, according to Reuters data.

The dollar index, measuring the US unit's value versus a basket of six major currencies, steadied at 76.803.

The pound's fall dragged the euro down 0.2 per cent to $1.4763 and 0.3 per cent to ¥162.24, while the dollar eased 0.1 percent at ¥109.87.

In Karachi, two traders said the rupee closed at 76.60/70 and 76.65 against the dollar. The rupee's previous record-low closing of 76.60/65 was struck on August 16, according to Reuters records. It hit an all-time intra-day low of 77.15 on Friday.

The rupee has lost 24 per cent against the dollar this year, and pressure has mounted on the central bank to intervene to stop its dive.

Pakistan is in talks with Saudi Arabia to defer an estimated $5.9 billion (21.67bn) worth of oil payments, and seeks over $1 billion in loans from the World Bank and the Asian Development Bank.

After six years of healthy growth under former president Pervez Musharraf, who quit last week to avoid being impeached by the coalition government, Pakistan's economy began hitting tough times last year.

Inflation is soaring, high oil prices have depleted reserves, and trade and fiscal deficits are widening.