Currency analysts attributed the local currency's slide versus the dollar to the termination of the Saudi Oil Facility (SOF) and the rising oil prices in the international market and unusual rise in machinery import.
In the meantime, supportive selling of the dollars by the State Bank of Pakistan (SBP) helped the local currency slacken its slide versus the dollar, they observed.
During the period under review, the euro gained Rs 11 versus the rupee for buying and selling at Rs 80.70 and Rs 81.00 against Rs 72.10 and Rs 72.40 at the end of 2003.
In terms of pound sterling, the rupee lost Rs 12 for buying and selling at Rs 114.20 and Rs 114.50.
The rupee lost 30 paisa versus the UAE dirham at Rs 16.15 and Rs 16.20 for buying and selling, respectively. Versus the Saudi Riyal, the rupee lost 55 paisa for buying and selling at Rs 15.80 and Rs 15.85, respectively.
In fact, in the middle of the year, the general trend of the market depicted rupees weakness, as negative impacts of sharp rise in the world oil prices and suspension of SOF kept it under pressure slightly versus the dollar and against the other leading world currencies, president of the Forex Association of Pakistan (FAP) said.
In the beginning of the 2004, the rupee had managed to hold its firmness on easy supply of dollars, he said.
The dollars inflow was on a slow but steady pace in the shape of remittances from expatriates and donors, he added.
During that period, the International Monetary Fund (IMF), the Asian Development Bank (ADB) and donor countries provided funds and loans to the country, in view of the initiatives the government had taken for war against terrorism, in addition to significant improvement in the economic indicators, leading analysts said.
But, with the start of fiscal (2004-05) the rupee started facing pressure, subsequently depreciating nearly 5.5 percent in July-October period on high oil prices and widening trade deficit as demand for the dollar increased by the importers for oil and other payments, they observed.
In November 2004, the rupee, recovered around three percent as the central bank sold around 400 million dollars for oil payments alone. In December, the SBP continued dollar selling to keep rupee at a reasonable level, analysts said.
They observed that the inter-bank market is depicting flexibility backed by rising trend in the remittances.
It seems that the rupee is stable but if dollars' demand increases, naturally, the local currency might not be able to sustain it's firmness versus the dollar in the coming days, they observed.
In the last month of the year, the rupee was cheered by sufficient supply of dollars as overseas Pakistanis sending foreign exchange to their families for Eid-ul-Azha preparations.
The marketing manager Nabeel Iqbal of the Khanani and Kalia International (KKI) commenting on the future direction of the market said that the rupee might see modest erosion in the near terms as the demand will increase by the pilgrims to meet their expenditure during the Haj.
Some bankers said that the rupee's recent appreciation was hurting exporters, as they found themselves caught in a quandary over meeting stiffening competition in the international markets, they added.
In the forth quarter of the 2004, the exports depicted some positive signs as the country had cleared most of the oil payments, with hopes of clearing other outstanding payments in January 2005.
Despite the rising trend in the oil prices in the world market, which touched 55 dollars per barrel mark, the government did not increase oil prices, which built extra pressure on the national exchequer.
Additionally, this factor boosted the dollar's value and hit the country's foreign exchange reserves adversely during that period, they said.
However, baffling it would appear that being quite aware of the oil prices shooting up in the world market and that it would push the trade deficit further up, why the government did not take steps to avert its foreseeable negative impact on trade deficit.
Since, it eventually had to increase the oil prices, why it hesitated all this long instead of making timely arrangements earlier to tackle the situation is being viewed by many as simply beyond average comprehension.
There seems to be some weight in the argument that the govt should have increased petroleum prices, when the prices were going up. For in that case, the national exchequer might have been saved of the extra ordinary burden.
Anyway, apart from all these unfavourable circumstances, optimism still has it that the country might be able to achieve the target of economic growth of 6.5 percent for the current fiscal year.
Most important and encouraging, it appears to be that country would be able to earn more foreign exchange due to bumper cotton crop despite a lot of hue and cry over the water shortage in the country, they added.
According to the SBP data, the impact of the rising world oil prices on the domestic economy, was limited as the government had frozen the prices of the petroleum products.
Consequently, as a result of higher import bills and short supply of food and other essential items, prices shot up locally and pushed the inflation rate higher, they said.
According to the latest figures, the country may not achieve its inflation and current account balance targets.
Drastic rise in the food items prices and upward trend of the house rents pushed the Consumer Price Index (CPI) based inflation rate up to 9.1 percent during the five months of the current fiscal.
Besides, the sharp rise in the country's trade deficit rose by 2.5 billion dollars during the months of July-Nov, as a result of widening gap between imports and exports.
The SBP in its first quarterly report hinted that the low interest rates for longer period were
hurting country's economy and analysts were of the opinion that this factor might propel the banks to raise interest rate in the coming days.
Due to lack of significant improvement in the foreign investment, subdued was the rupee's firmness during the first quarter of the fiscal year, they noted.
Commenting on the impacts of the quota-free era of the World Trade Organisation (WTO) on the rupee's health, they said that locally the performance of national currency would depend on market forces after the lifting of trade barriers and announcement of liberalisation policy.
In the meantime, it is claimed the IMF has now voiced its satisfaction with the economic performance, particularly its growth rate of over six percent and its macroeconomic achievements.
At the same time, the Fund is not satisfied with the large financial deficit in the power sector.
In the last week of the year, the SBP said in its first quarterly report that the trade deficit would widen and the inflation rate would also follow the same pattern and will rise by 7.6-8.2 percent during the current fiscal year due to sharp increase in the prices of essential commodities.
In the meantime, the country's economy is poised to grow by 6.5-7.1 percent against the earlier target of 6.6 percent.
INTERNATIONAL SCENARIO FOR DOLLAR: The general vision of the international markets has not changed in 2004, as the dollar persistently drifted lower in terms of the major currencies, analysts said.
At the beginning of the WTO regime, it is expected that the US might receive influx of products from China, Japan and other countries, which might push the dollar further down in the international markets.
On the other hand, the greenback might expand its ground versus the rupee in view of the rise in its demand to meet the payment requirements, it is apprehended.
Asian foreign exchange forecasters are predicting a fourth straight year of gains for the South Korean won, Taiwan dollar, Thai baht and other Asian units in 2005, with Asia's horrific tsunami disaster failing to dampen the regional currency outlook.