The rupee on Thursday fell to a record low because of negative sentiment surrounding the country's economic outlook, and strong dollar demand for oil import payments amid soft inflows.
Dealers said they expect the local unit to stay under pressure for now, as dollar payments are typically higher in July and August because of stronger oil demand and debt payments
The rupee closed at 86.80/85 to the dollar -- its weakest ever closing -- down from 86.64/70 on Wednesday.
The previous weakest close by the rupee was 86.75/80 on August 1.
"The rupee hit a record low of 86.85 today, and the main reason for the rupee being under pressure is because it's sentiment driven," said a dealer at a foreign bank.
Stalled payments from a bailout programme by the International Monetary Fund (IMF) is also negatively impacting the rupee.
The IMF has criticised the government for its patchy implementation of fiscal reforms, and has held back the sixth tranche of an $11 billion loan programme since August last year.
IMF and Pakistan officials were due to meet last month, but the meeting has been delayed and no new date has been announced.
Dealers said increased remittances from Pakistanis working abroad had supported the rupee and shielding the currency from a sharp fall in recent weeks, but the increased dollar demand over the last week pushed the rupee lower.
According to official data, remittances rose 38.57 percent to $1.1 billion in the first month of 2011/12 fiscal year, compared with $791.18 million in the same period last year.
In the currency market, stocks fell more than 1.2 percent because of the deteriorating security situation in the country's financial hub.
In the money market, overnight rates rose to 13.40 percent, compared with the previous day's close of between 10.75 percent and 11.0 percent amid tight liquidity in the interbank market.
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